Top 6 Student Loan Consolidation Tips

Consolidation is: Combining more than one loan to have one loan servicer AND one monthly payment.

Know your loan type: Are your loans federal or private? Each loan type has specific rules.

Know the rules: Federal and private education loans cannot be combined into a new federal loan (Direct Consolidation loan), BUT these loans can be combined into a new private loan. 

Don’t get ripped off: There are NO FEES when consolidating federal loans through the U.S. Dept. of Education. Beware of companies charging for a Direct Consolidation Loan, and read our article Avoiding Scams from Student Loan Debit Relief Companies before taking action. 

Refinancing costs but consolidation does not: Private loan consolidation (AKA refinancing) usually involves fees, credit checks and employment verification. The credit check helps determine the interest rate offered (nice score = nice rate).

You can’t unconsolidate a Direct Consolidation loan: If you’re going for Public Service Loan Forgiveness while working at a qualified employer AND have been making payments — CONSOLIDATION WILL RESET PAYMENTS. You’ll have to start the120 payments over.  Switching from a federal to a private loan also reduces options for payment plans, deferments and forbearances. Before deciding, ask lenders what options they offer if you need to lower or postpone payments (job loss, sickness, etc.).