Student Debt Consolidation: Pros and Cons
There are advantages to student loan consolidation. Rolling all of your debt into one loan will be less of a financial burden, since you’ll now only have one payment per month.
However, if you consolidate student loans, you should also beware of the drawbacks. If you received any kind of incentives when you took the original loan, you may have to pay them back. You risk losing the option of loan forgiveness and you lengthen the life of your loan, and thereby increase the amount of interest you will pay over time.
What Interest Rate Will I Pay?
Your new rate is the average of all of your current loans rounded up to the next 1/8th of a percent. This rate remains fixed for the life of the loan, and is capped at 8.25 percent.
Can I Consolidate Any of my Loans?
While federal and private loans may usually be consolidated individually, in most cases they cannot be consolidated together. So, you can combine private with private but not private with federal.
How do I Apply?
If all of your current loans are with one lender, you should remain with that lender, if not, chose the lender of your choice. Whichever route you decide to follow, your lender of choice will have an application process for you to follow. For the most part, you should be able to apply online.
Other Things to be Aware of.
Depending on your lender, there may be a minimum and/or maximum amount you can consolidate.
You may not need a cosigner, but having one with a good credit score may work in your favor and lessen the interest rate you pay.
If you have applied for consolidation, keep up with the repayment schedule you already have in place until you receive a new disclosure and repayment schedule.