Tips for Student Loan Consolidation

• Lower monthly payments. Student loan consolidation provides a longer repayment term, which in turn lowers your monthly payment. This will free-up more money to use for other expenses such as rent or mortgage payments, food and car expenses, utility expenses, and credit card payments. Depending on your total balance, you could reduce your monthly payments up to 53%. Because there are no penalties for early or extra repayment, you can make larger payments when it becomes affordable to.
• Lock in a low fixed interest rate. Currently, unconsolidated federal student loans have a variable interest rate which changes each year on July 1st based on the Treasury bill. By consolidating your student loans, you can lock in a fixed interest rate for the life of your loan.
• Customize a payment plan. By consolidating your student loans, you'll have the opportunity to choose a payment plan that best fits your current income level. Plans such as the Graduated Repayment Plan start out for the first several years as a lower interest only payment, and then increase to a level repayment plan. This plan is helpful for those who need payment relief right out of school, while they look for a job and get established.
• One payment per month. By consolidating, you eliminate the need to make multiple monthly payments to each of your federal lenders. With all of your loans combined, you will only need to write one check each month.
• Maintain your deferment and interest subsidy benefits. Because federal student loan consolidation is simply a new federal loan, you will not lose your loan deferment and forbearance benefits. Additionally, you will maintain your interest subsidy benefits on any subsidized FFELP or subsidized Direct loans that you consolidate.
• Help your credit. Consolidation takes all of your existing federal student loans, pays them off in full, and combines them into one new loan. Instead of having multiple open loans with limited payment history, you will have just one loan. Your older student loans will be listed as paid in full. In a nutshell, consolidation helps eliminate open lines of credit.