Many students have to rely on student loans to pay for college, whether they are federal loans such as Perkins or Stafford loans, or private loans through a company such as Wells Fargo or Discover. In some instances, more than one loan is required to pay for schooling, especially for parents who are paying for more than one college student.

college student loan consolidationWhen more than one loan is taken out, it may be tempting to consolidate the loans into one loan. When consolidation is done it combines all the existing student loans into one, which then pays off the others. Federal student loans are eligible for consolidation and some private loans can be consolidated as well, depending on the lender. Consolidation is for students or parents, although parents cannot consolidate with students.

Let’s take a closer look at loan consolidation. Here are the do’s and don’t’s when considering consolidating your student loans:

1. Before consolidating, do crunch the numbers.

It may seem like a lot to think about, to add the amount of one loan and consider its interest rate to another loan amount, with its interest rate and figure out if it’s worth consolidating. explains that “the interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.”

So if you have two loans with different interest rates, the weighted average will be somewhere between the two rates. Then add 1/8 of a percent and there you get the interest rate on the consolidation loan. So your interest rate on the consolidation loan may be lower than your highest interest rate loan, but it may also make your lower interest rate higher, so really the amount of interest you pay over the life of the loan is going to be about the same.

It may not always be to your advantage to consolidate. Keeping them separate allows you to work to pay a higher interest rate loan off, then working on another to pay it off, etc., decreasing the amount of interest you pay over the life of the loan. So it’s worth looking into the numbers to see if it really makes sense.

2. Do think about repayment options and whether it’s to your advantage or disadvantage.

Consolidation provides the option of different repayment plans, such as extended repayment, graduated repayment or repayment contingent upon income. The term of the extended repayment may be higher on a consolidated loan than on an unconsolidated loan because they can reduce the size of the monthly payment, increasing the term of the loan.

This can be an advantage and disadvantage. This is nice when you need a more affordable monthly payment, but it also means you are paying more interest over the lifetime of the loan. Just because you are given the option to pay off your loan over 25 years doesn’t mean it’s best to take it.

3. Do consider the benefits of your current loan.

One thing to note about consolidating loans is that any interest that has been deferred on any of the loans being consolidated, such as interest deferred due to the in school grace period or deferred for an economic hardship will be capitalized, or added to the balance of the loan. Once you consolidate, you may lose the grace period offered for some federal loans, such as the Perkins loan, which offers nine months to begin repayment, or the loan forgiveness premise.

4. Don’t pay fees for consolidating.

There is no cost to consolidate loans. There may be an increase in the interest rate, but there are no fees to consolidate student loans. suggests:

“Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check. There is never an up front fee. If someone wants you to pay an up front fee, chances are that it is an example of an advance fee loan scam.”

5. Don’t consolidate without first utilizing an online consolidation calculator.

Make sure consolidating your loans makes financial sense. There are many sites online that you can utilize to put your loan information into to see if it’s better to consolidate or to keep your student loans separated. has an online calculator. If those don’t work, search for another, because there are many online to help you decide what is best.

6. Don’t be hasty.

You can only consolidate student loans once. Consolidation can be done during the grace period for the loans or after the loans enter the repayment phase, not while in school for students, although parents can consolidate PLUS loans any time. But it can only be done once, unless you are adding a new loan into a previous consolidation loan. So once you consolidate, you are limited to the terms of your loan.

Consolidating your student loans may or may not be the best option for you, but at least now you know what to do and what not to do when considering it. Of course, the best way to avoid having to consolidate your student loans is to use as little of them as possible and stay clear of those dangerous interest rates.

To learn more about student loan interest and how ti can affect, read our article “Considering Student Loans? Interest Rates Are Key.”


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