Home > Student Loans > Is Student Loan Consolidation Right For You?

Comments 4 Comments

Student loan balances recently surpassed credit card debt for the first time in history, with young adults graduating with an average of $24,000 in loans. Under so much financial pressure, some may consider loan consolidation. Before taking that step, however, it’s important to weigh the pros and cons.

1. Consolidation allows you to lock your loans into one low rate that will not fluctuate over the years.
2. You can manage your loans more easily with one monthly payment to one lender.
3. Loan consolidation may help boost your credit score by lowering the number of open accounts in your name.
4. You may receive favorable rates if you meet certain conditions, such as making on-time payments for a pre-determined amount of time.

1. Consolidation loans may extend your repayment period to between 10 and 30 years, meaning you will pay more in interest over the life of your loan.
2. Qualifying for a consolidation loan can be difficult and you may need to meet certain balance and lending requirements to be eligible.
3. You may miss out on other more affordable repayment options. Government programs, volunteer organizations and public service employers may provide forgiveness plans or repay a portion of your debt in exchange for your services.

You have a number of student loan repayment options, so make sure you do your research and understand the pros and cons of each choice before you make a decision.

[Featured Products: Find The Loan That’s Right For You]

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • AlfinaHawaii

    It will be paid off with my Life Insurance proceed… there is no winning in this Student Loan scenario.

  • http://www.PGPresents.com Paul S. Garrard

    Thank you for this article, but with all due respect, some of the information is misleading and incomplete.

    The majority of borrowers are NOT able to lock in low rates, unless they started borrowing prior to July 1, 2006, when interest rates on some federal student loans (such as Federal Stafford) were variable (these rates now are quite low, and they reset every July 1). The rates on new loans disbursed on or after July 1, 2006, such as Federal Stafford Loans, have been fixed at 6.8% (and higher for PLUS Loans, 7.9% with Direct PLUS and 8.5% for the former FFELP PLUS Loans). The rate has dropped on new Subsidized Stafford Loans the past 5 years, but only for undergraduates and only on Subsidized Staffords, not the companion Unsubsidized Stafford, and new Stafford Loans will carry a 6.8% rate this next year for all borrowers, including undergraduates.

    In truth, the majority of borrowers who consolidate lock in a rate higher than what they already have, as the weighted rate is rounded up an eighth of a percentage point and then locked for the life of the loan.

    In general, qualifying for a federal consolidation loan (available only directly from the federal government) is easy, though more than a few would offer that the actual consolidation process is anything but, and the process routinely takes 60-90 days (this based on information from the Department of Education who runs the program).

    The third con listed is a bit misleading, as the Public Service Loan Forgiveness (PSLF) program most certainly applies to eligible borrowers who consolidate. In fact, more than a few borrowers are consolidating into the Direct Consolidation Loan program for the sole purpose of converting their FFELP Loans (Stafford, Grad PLUS, Federal Consolidation from private lenders) into a Direct Loan (only Direct Loans are eligible for PSLF).

    Respectfully submitted,

    Paul S. Garrard

  • Yomar

    Now I’m confused! Some say consolidation may lead to loose the Public Service Loan Forgiveness and some say that consolidation does not affect the foegiveness program. This article needs to updated! What is the correct information? Does consolidation of federal student loans take you out from PSFL elegibility?

  • government student grants for college

    confused too. Which is which? Currently im still paying for my student loan (48K)
    And as far as I know Student loan debt is much harder to discharge through bankruptcy than other types of debt, and the government can sometimes garnish your wages if you default on your federal student loans.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team