Federal student loan consolidation is something to consider even if you’re not having trouble making your current payments. First, it’s just more convenient to have one monthly payment. That payment can also be lowered, but if you’re not having trouble making the payments then that might not be as important to you. Saving money in interest charges is another good reason to consolidate. There are some tips you can follow when considering consolidation that can help you decide how to proceed.
#1: Decide whether or not you really want to extend the loan.
If you’re making your payments on time and not struggling, then you could continue to pay as you have been, or consolidate to get a lower interest rate and one payment. You should be aware that by consolidating you extend the length of the loan and will pay longer, as well as pay more interest. But if you want to save money on interest you can get a federal student loan consolidation and pay it off early so that you don’t pay more and you don’t necessarily pay longer. Just pay extra toward the principle as much as you can, and even if the loan has a 10-year or more repayment plan you can pay it off and save a great deal on interest.
#2: Go with a well-regarded lender for federal student loan consolidation.
Be sure you choose a lender who not only has lots of experience in consolidation but is a reputable lender. There are many plans and scams that ask you to pay a fee in order to “qualify” for loan consolidation. You do not need to do this, as any lender can handle this for you. So research your lender carefully to make sure of what you’re getting into.
#3: Variable rate loans are the best ones to consolidate.
If your student loans are all fixed-rate loans, then consolidating might not be all that much benefit to you. Sometimes a fixed loan consolidation actually gives you about the same interest rate as you had on the loans before, so there’s no real savings in interest. In fact, you’ll pay more because the loan repayment is now on a longer schedule so you’ll pay longer. If you have variable rate loans, then a federal student loan consolidation will benefit you by locking in one interest rate which can’t go up if the interest rate raises.