You’ll get a new loan equal to the combined amount of your old loans.
It will have a fixed interest rate based on a weighted average of the loans you consolidate.
In cases like this, consolidating your student loans could help you manage your loans more efficiently. Here’s what to keep in mind before you dive into student loan consolidation.
If you have multiple federal student loans and want to simplify your payments, consolidating can be a smart strategy.
And while it makes sense to do business with an institution that you already know and trust, you may be disappointed if you get turned down for a loan.
Banks and credit unions offer a variety of traditional loans and other products, but they typically don’t cater to debt consolidation loans for people with bad credit.
You will lose your rights under the federal loan programs once you choose to consolidate with a private lender.
Direct consolidation loans are now the only type of federal student consolidation loan.
Consolidating student loans via refinancing is best for people whose financial position - in terms of employment, cash flow, and credit - has improved since they graduated from school.
Depending upon the total balance you are consolidating, you may extend the repayment period for up to 30 years with consolidation.
The extended period makes the monthly payment amount more manageable; however, the longer your loans are in repayment, the more interest you will pay over the life of the loan.
Consolidating federal student loans may be a good strategy to lower monthly payments or to get out of default, but it is not always a good idea.
As you weigh the pros and cons, keep in mind that timing is critical.