July 26, 2021

Is Consolidating Student Loans A Good Idea?

Chipper Help

If you want to consolidate student loans, you must assess your circumstances. While federal student loan consolidation may be an ideal option for some people, others may find disadvantages in simplifying their multiple loans into one policy. Here are some pros and cons to consider before you decide to consolidate student loans:

Advantages of Consolidating Student Loans

Most pros when you consolidate student loans involve convenience.

  • One Monthly Bill: When you consolidate student loans, you combine multiple student loans into one policy. If you have several federal student loans from different loan servicers, consolidating them into one loan will simplify your repayment. You will only have one policy with a single monthly bill to pay for those multiple loans.
  • Longer Repayment Time: Since you will combine all your federal student loans into a single loan, you may have up to 30 years to repay everything. In addition, stretching your repayment plan for all your loans in one policy could lower your monthly payments.
  • Get a Fixed Interest Rate: Consolidating student loans will give you a fixed interest rate. A fixed interest rate remains the same throughout a loan’s lifespan. Even if you have student loans with variable interest rates, which fluctuate over time, you may convert them into a fixed rate through consolidation.
  • Access More Income-Driven Repayment Plans: You may qualify for the Public Service Loan Forgiveness (PSLF) Program and more income-driven repayment plan options if you consolidate student loans. These benefits are only available if you have Direct Loans.

Direct Loans are student loans you get from the William D. Ford Federal Direct Loan Program. If you have federal student loans other than Direct Loans, you may not have access to specific repayment options. However, consolidating these loans will grant access because you will consolidate student loans into a Direct Consolidation Loan.

Disadvantages of Consolidating Student Loans

The primary con when you consolidate student loans is the benefits you may lose.

  • Lost Borrower Benefits: Consolidating federal student loans into a single policy may cancel certain borrower benefits associated with specific loans. Individual student loans may have interest rate discounts, refunds on your loan’s principal, or even loan cancellation benefits. Reconsider your benefits with your separate loans before deciding to consolidate student loans.
  • Lost Credit: You may lose credit you earned by making qualifying payments toward PSLF or income-driven repayment plan forgiveness when you consolidate student loans.
  • Accumulated Outstanding Interest: Consolidating student loans will consider any outstanding interest on your separate loans and then include them in your original Direct Consolidation Loan. So, any interest you may have had on your individual student loans would accumulate on your new loan, giving you a higher principal balance.
  • More Time to Pay: The longer repayment period when you consolidate student loans may be a hassle to some borrowers. Although you could lower your monthly payments, you may end up paying more in interest than your principal balance.

Conclusion: Is Consolidating Student Loans a Good Idea?

You must assess your unique circumstances before deciding to consolidate student loans. For instance, combining your current federal student loans into a single policy may give you more time to repay the loan. At the same time, this extended repayment period may cause you to pay more in interest.

You must also consider the benefits you get from individual federal student loans. You may have discounts on specific policies, which you will lose if you consolidate student loans into one policy. Be sure to understand your current situation before applying for a Direct Consolidation Loan.

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Chipper can help you find a student loan repayment plan that actually fits into your budget. You simply fill out your information and link your student loan account for us to generate your options in seconds. We help the average student loan borrower save over $300 a month off their student loan monthly payment. Lowering your monthly payment plan can game changing for your personal finance and can be done in minutes! Sign up for Chipper today to get on track with your student loans.

Use Chipper for The Best Path to Forgiveness

Finding your path to student loan forgiveness is easier than ever before. Chipper helps members find better Income-Driven Repayment (IDR) plans every day. Once enrolled in an eligible repayment plan, we can help you explore your forgiveness options and understand your path towards forgiveness. Sign up with Chipper today and get on track with your student loans.

Use Chipper for Round-Ups

Paying off your student loans doesn’t have to be a long and painful journey. Round-Ups are a way to directly pay off your loans with your everyday spending! By tracking your linked spending account(s), we will calculate the rounded up amount from each transaction in a week (IE spending $4.28 would add $0.72 to the weekly amount). We then initiate a payment towards your student loan for the weekly amount. Get chipping away on your student loans with Chipper today.

Use Chipper for Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program was created to provide relief to borrowers aiding the public sector. Unfortunately, 30% of applicants are denied due to incorrect paperwork. We can help! Chipper was created to solve this issue by assisting borrowers in understanding their options as well as allowing forgiveness eligible users enroll into the best forgiveness program available. Sign up for Chipper today to see your student loan forgiveness options and get the forgiveness you deserve.

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The Teacher Loan Forgiveness (TLF) program was created to enable teachers working in Title 1 schools to receive student loan forgiveness of up to $17,500 (depending on their teaching subject). Chipper has helped teachers from all over the country qualify for TLF program and can help you get the forgiveness you deserve today. Find out if you qualify for forgiveness in minutes with our employer search tool.

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