Consolidating student loans may be favorable for you as you get to focus on a single monthly payment to only one lender. However, you might be wondering, “when should I consolidate my student loans?”
If you prefer a fixed interest rate, want to reduce your monthly payment, or qualify for loan forgiveness, you will benefit from student loan consolidation. To know more about when to consolidate student loans and its corresponding pros and cons, check out the following article!
If you want a fixed interest rate, then student loan consolidation is a good option. For instance, your previous federal loans include variable interest rates. Depending on market changes, your monthly payment and interest rate will also vary. With student loan consolidation, you will pay a fixed rate until you’re able to pay them in full.
You can also consolidate your student loans if you want to reduce your monthly payments. If the current payment schemes are a bit hard for you, consolidation will be of great help. Instead of a 10-year repayment plan, you can have it extended for a maximum of 30 years, thus lowering your monthly payment. While the interest becomes higher, you’ll have more time to plan your finances and quickly get back on track.
A single missed payment can already affect your credit score. Since student loan consolidation lets you get new payment terms and reduced monthly payments, you can avoid default. As a result, you won’t suffer from a bad credit score.
If you took federal loans from Perkin Loans or Federal Family Education, you do not qualify for income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). However, consolidating your student loans makes them part of the Direct Loan Program. Thus, you can qualify for IDR plans and loan forgiveness.
While consolidating student loans comes with advantages, you also need to consider the following disadvantages:
The answer to your question “when should I consolidate my student loans” depends on your circumstances and preferences. If you want more manageable repayment terms, get a fixed interest rate instead of a variable interest rate, avoid default, or become eligible for IDR plans and PSLF, you can apply for student loan consolidation. However, consider the disadvantages too to determine whether it’s the right step for you. For more relevant information about student loans, get started here!