Loan Consolidation

What is consolidation?

Loan consolidation is a new loan that is created by combining two or more federal student loans to reduce the amount of monthly payments and/or extend the loan repayment term.

Should you consolidate?

We believe that an important consideration in the decision to consolidate should be the total cost of the loan. This can be higher with consolidation because the repayment period is much longer than the standard period. Furthermore, any benefits associated with loans are lost when those loans are consolidated.

Some of the effects of consolidation in today's environment are as follows:

  • Possible forfeiture of borrower benefits – benefits vary with lender
  • Rounding may result in a higher interest rate
  • Longer term = increased interest costs
  • May negatively affect grace, deferment, or forgiveness options

For more, see the Department of Education's information on loan consolidation.