When Student Loan Consolidation Makes Sense

If you're in default on your student loan, if you want your federal student loans to be eligible for Public Service Loan Forgiveness, if you want to lock in a fixed interest rate while they're still low, or if you simply want to make one – instead of several – payments per month, student loan consolidation could make sense for you.

You can consolidate most federal loans including Subsidized or Unsubsidized Stafford Loans, PLUS loans, and Perkins loans through the Direct Consolidation Loans service, but you can't consolidate private loans and you can't re-consolidate your Direct Consolidation Loan, so if you're currently in default, this may be your last chance to rectify the situation.

Be careful to calculate the full cost of your loan(s) in order to determine if consolidation is the right move – be wary of opting for lower monthly payments, for example, in favour of a longer re-payment term, which could cost you a lot more in the long run. Also beware of consolidating federal loans through a private provider – federal loans carry borrower protection that is lost if you choose a private scheme. Federal Direct Consolidation Loans also carry a lower interest rate.

You can apply online for a Direct Consolidation Loan at www.loanconsolidation.ed.gov but you will need to have all of your outstanding loan information handy.