August 9, 2021

When Should I Consolidate My Student Loans?

Chipper Help

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!

Choosing a Fixed Interest Rate

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.

Reducing Monthly Payments

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.

Avoiding Default

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.

Qualifying for IDR Plans and Loan Forgiveness

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.

Disadvantages of Student Loan Consolidation

While consolidating student loans comes with advantages, you also need to consider the following disadvantages:

  • Losing borrower benefits: You might lose specific benefits, like principal rebates, interest rate discounts, and grace periods.
  • Paying a higher interest rate: Given that consolidation makes your repayment period longer, you will most probably pay higher interest in the long run. Also, the weighted average interest rate of your older loans rounded up to one-eighth of one percent will be your new interest rate.
  • Losing IDR plan and PSLF credits: With student loan consolidation, your previous payments for IDR and PSLF will no longer be counted.
  • Failing to consolidate private loan consolidation: You can’t consolidate private student loans. So, they remain separate from your federal loans. While some private lenders let you consolidate including federal loans, the interest rates are relatively higher.

Final Thoughts

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!

Use Chipper for Lower Payments

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.

Use Chipper for Teacher Loan Forgiveness (TLF)

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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