A federal consolidation loan may help make payments more manageable for some by combining several federal student loans into one loan with one monthly payment. You need to apply for loan consolidation and choose a standard, an extended, a graduated, an income-contingent or an income-sensitve repayment plan. Depending on the amount of your debt, standard and graduated repayment plans have 10 to 30 year repayment periods.
Is loan consolidation is right for you?
Are your monthly payments manageable?
If you have trouble meeting your monthly payments, have exhausted your deferment and forbearance options, and/or want to avoid default, a Direct Consolidation Loan may help you. Use the U.S. Department of Education's online calculator to find out what your monthly payments would be under each of the repayment plans.
Too many monthly payments driving you crazy?
If you send payments to more than one lender every month, and want the convenience of a single monthly payment, consolidation may be right for you. With a Direct Consolidation Loan, you will have a single lender - the U.S. Department of Education - and a single monthly payment.
What are the interest rates on your loans?
If you have variable interest rates on your Federal education loans, you may want to consolidate. The interest rate for a Direct Consolidation Loan is fixed for the life of the Direct Consolidation Loan. The rate is based on the weighted average interest rate of the loans being consolidated, rounded to the next nearest higher one-eighth of one percent and cannot exceed 8.25 percent. Use the U.S. Department of Education's online calculator to find out what your weighted average interest rate would be if you consolidate your loans.
How much are you willing to pay over the long term?
Like a home mortgage or a car loan, extending the years of repayment increases the total amount you have to repay.
How many payments do you have left on your loans?
If you are close to paying off your student loans, it may not be worth the effort to consolidate or extend your payments.
Check out the U.S. Department of Education's website for more information on loan consolidation.