Debt Management Options
CashCourse: This Wheelock partner website helps students navigate their finances, including understanding loans.
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Consolidation loans allow you to consolidate (combine) multiple student loans into one loan. Loan consolidation centralizes your loans and can lower monthly payments by giving you up to 30 years to repay your loans. You might also have access to alternative repayment plans that you would not have had before, and you'll be able to switch your variable interest rate loans to a fixed rate.
However, if you increase the length of your repayment period, you'll also make more payments and pay more in interest. Be sure to compare your current monthly payments to what monthly payments would be if you consolidated your loans. You might also lose any borrower benefits offered with the original loans—such as interest rate discounts, principal rebates, or some loan cancellation benefit—that can significantly reduce the cost of repaying your loans.
If you want to lower your monthly payment amount but are concerned about the impact of loan consolidation, you can consider reevaluating your budget and income situation. You can also consider deferment or forbearance as options for short-term payment relief needs.
Once your loans are combined into a Consolidation Loan, they cannot be removed. The loans that were consolidated are paid off and no longer exist.
Federal Versus Private Loan Consolidation
- Most federal student loans are eligible for consolidation. If you are in default, you must meet certain requirements before you can consolidate your loans. A PLUS Loan made to the parent of a dependent student cannot be transferred to the student through consolidation. So, a student applying for federal loan consolidation cannot include the PLUS loan the parent took out for his or her education.
- Private student loans cannot, in general, be consolidated with federal student loans. The low interest rates on federal consolidation loans are not available to private education loans. Nevertheless, there are several options for consolidating private education loans. The main benefit of such a consolidation is obtaining a single monthly payment. Also, since the consolidation resets the term of the loan, this may reduce the monthly payment.