Fast Fact

Students typically have five to seven loans at graduation.

Source: CBS News

Loan Consolidation

Loan consolidation allows you to combine one or more existing student loans into a single new loan. Consolidation may be the right option for you if:

Realize there are advantages and disadvantages to loan consolidation:

Pros Cons
Lower monthly payments
Consolidation may reduce your monthly payments by as much as 50% or more.
Longer repayment schedule
Consolidation may extend how long you have to pay off student loans, sometimes up to 30 years.
Fixed interest rate
Your monthly payment is always the same.
More interest to pay
You may pay more interest since you'll be making payments for a longer period of time. Plus, your new interest rate is higher than the average interest rate for your multiple loans.
One bill, one payment
Managing one loan with one monthly payment is more convenient than managing multiple loans.
Loss of loan incentives
When you combine multiple loans into one, you may lose any incentive programs on the individual loans that you combined.

Do your homework. If you can manage a smaller payment or if you're experiencing a financial hardship, you may want to consider changing your repayment plan before you consider consolidation.

Helpful Tips

Calculators

Test Your Knowledge

You consolidate $30,000 in loan debt at 6.875% interest. Which repayment plan is better for your wallet?

  1. 10-year repayment
  2. 20-year repayment

1. 10-year repayment

Although the monthly payment may be lower with 20-year repayment, you'll pay more than double in interest:

10-Year Repayment

  • Monthly payment = $346.40
  • Total amount paid = $41,568.00
  • Total interest paid = $11,568.00

20-Year Repayment

  • Monthly payment = $230.35
  • Total amount paid = $55,284.00
  • Total interest paid = $25,284.00