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Consolidation of Student Loans - Should You Consolidate Federal Loans?

By Edited Oct 20, 2016 1 2

Due to the exorbitant costs that come with attending a four-year university, just getting good grades and graduating should not be your only major concern -- figuring out how to pay for your student loans is an extremely important factor as well. Student loans can be separated into two different types: federal student loans and private student loans. While some scholarships can go a long way in helping you with your college funding, student loans are one of the most popular ways to pay for college. The real issue arises when you have more than one outstanding student loan, and you're having to juggle multiple loan payments every month. When this occurs, consolidation of student loans might come in handy.

When you consolidate student loans, you're combining all of your loans into one. Most financial experts recommend that you do not consolidate private and federal loans, because you will then end up losing the benefits that come with your federal student loans (such as the lower, fixed interest rate). You can, however, consolidate your federal student loans into one loan. What are the benefits of doing this? Well, it makes it easier to manage your finances, because instead of paying several loan bills every month, you're only paying one. Not only that, but you can also lower your monthly payment overall. Student loan consolidation can be a great option for people who have lots of outstanding loans out. If you're wondering if you should consolidate your federal loans, read on to learn more about consolidation of student loans.

What are the advantages & disadvantages of consolidating?

There are many positives when it comes to federal government student loan consolidation compared to consolidating private student loans. For one thing, it's a far easier process, and not only that, you can get a much better loan deal overall.

You don't have to pay anything when you want to consolidate your federal student loans -- there's no fees of any kind. There's no credit checks either, so if you have bad credit, you don't have to worry about being refused. The thing is though, if you have poor credit, it might not be in your best interest to consolidate your loans. Loan consolidation comes with a lot of financial responsibility -- usually because these loans will be repaid over 25-30 years -- so if you're not able to pay your bills on time or are in a position where paying back your loan will be difficult, this may not be the best choice for you. Consolidation of student loans usually comes with a higher interest rate, so it may end up hurting you in the long run if you're not in a good financial position.

On the other hand, this is another one of the positives of federal student loan consolidation. You can defer the payments in the case that you find yourself in a financial emergency. This is comparable to private student loans, in which you cannot defer payments at all, for any reason.

Consolidating student loans can cut your monthly bill up to 50%. But the one considerable drawback of consolidating student loans is that you may end up, as stated, having a higher interest rate. It's will be up to you to decide whether or not you're better off just having multiple loans, in the long run. Another thing is that if you consolidate your student loans during your 6 month grace period, that grace period will become void.


If you're really thinking about whether or not to consolidate student loans, you should do proper research -- both regarding lenders, possible interest rates, and your own financial situation. Consolidation of student loans is no light matter, so it's important to take it seriously and make sure it's the right choice before making any major decisions.


Dec 31, 2010 6:35pm
College is becoming increasingly difficult to afford.Borrowing money for college is a big responsibility but college remains a smart investment for obtaining a satisfying career that earns a competitive salary.
Apr 12, 2011 5:06pm
This is definitely a great piece of writing that was well worth every moment of reading. You did a great job and should be proud of this fantastic Infobarrel.
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