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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:
- Your student loan debt is significant.
- You have more than one type of student loan.
- You're having trouble making the minimum monthly payments on your multiple loans.
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
- Not all loans qualify for loan consolidation, so check to see if this is an option for you.
- Once you consolidate, you can re-consolidate only if you have an eligible student loan that was not included in the original consolidation.
Supporting Content
Calculators
Test Your Knowledge
You consolidate $30,000 in loan debt at 6.875% interest. Which repayment plan is better for your wallet?
- 10-year repayment
- 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