What is consolidation?
Loan consolidation is a new loan that is created by combining the repayment of two or more loans to reduce the amount of monthly payments and extend the loan repayment term.
Should you consolidate?
The only option for consolidating your federal student loans is now through the Direct Loan program. Typically loan consolidation reduces your monthly payment by extending the term of the loan. An important consideration in the decision to consolidate should be the total cost of the loan. This can be higher with consolidation because the repayment period can be much longer than the standard period. Further benefits associated with loans are lost when those loans are consolidated.
However, if you are planning to work in a Public Interest Job and hope to qualify for loan forgiveness the loans to be forgiven must be held by the Direct Loan program. So for certain borrowers the potential for loan forgiveness may outweigh the cost of losing borrower benefits.