The Pros and Cons of Consolidating Student Loans

By Ryan Laspina
Senior Specialist, Red Flags and External Reviews at APUS

Consolidating student loans is An option that Federal Student Aid (FSA) loan borrowers with multiple loans and lenders have. A consolidated loan groups all of your outstanding student loans into one lump-sum loan. This practice has both its advantages and disadvantages, and some of these pros and cons are explored below.

Pros of Consolidating Loans:

• A consolidated loan could turn 10 student loans into one large loan, which simplifies repayment, and eliminates multiple deadlines. Simpler is better when it comes to repayment, and eliminating deadlines will make it less likely that you will default on your student loans.
• Consolidating your school loans can produce some of the same benefits that refinancing a house or a car does; namely, you can get a lower interest rate than the original interest rates on your school loans. There is no guarantee, but it is more likely than not that a consolidated loan will have a lower interest rate. There are certain criteria you must meet to get lower interest rates, such as a good credit score. Make sure you talk to your loan servicer to see what the best option is for you.

Cons of Consolidating Loans:

• Consolidating your loans to get a lower interest rate may actually cost more in the long run. Sure, the interest payment each month could be lower, but you will probably be paying longer on the life of the loan. Lower interest rates usually only come with longer-term loans. On a monthly basis, this can lower your payment, but across the entire life of your loan, you may actually pay more than you would have if you did not consolidate.

Deciding whether you want to consolidate your student loans (assuming you have multiple loans and/or lenders) presents many factors to consider. While consolidated loans may simplify repayment, it could also cause you to lose certain benefits you had with other lenders. You can also usually get a lower interest rate if you consolidate your loans, but you may end up paying more in the long run. Make sure you understand all of these factors, and speak with your loan servicer to determine if consolidating is right for you.