The Direct Consolidation Loan allows you to consolidate multiple federal student loans into one.
You can choose to consolidate your private loans into one loan as well.
But if you switched majors, transferred colleges, or went on to graduate school, you may be among the 19% that owe ,000 and above, or the 5.6% who owe more than 0,000.
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You’ll no longer owe the original loans, and since this consolidated loan is new, it will come with a new interest rate, a new payment policy, and new terms and conditions.
There are both benefits and drawbacks to consolidating your loans, which we’ll discuss in this article.
While you can’t combine your private student loans with federal loans into the Direct Consolidation Federal Loan, you may find that a private loan consolidation will accept your federal loans.
However, most sources advise against consolidating federal and private loans together. For instance, Discover Student Loans offers a number of repayment assistance options, including deferments, extensions, forbearance, and hardship to help borrowers repay their loans.
A recent Federal Reserve report found that 20 percent of the drop in homeownership among 24- to 32-year-olds between 20 was due to an increase in student loan debt.
Here's how to decide whether refinancing or consolidating your student loans could make your finances more manageable.
Each has its own pros and cons, which we’ll get into in a little bit.
But in general, here are some of the benefits and potential drawbacks when considering student loan consolidation.
One payment could make you more likely to pay on time, which is the biggest factor in maintaining a strong credit score.
Refinancing has the added benefit of reducing the cost of your loans if you qualify for a lower interest rate or monthly payment.
Choosing to consolidate your loans is an individual choice and the right decision will depend on the specifics of your loans — the types of loans, interest rates, balances, borrower benefits, and more — as well as your current financial situation.