Skip Navigation
School Search Form
After Navigation
Home Ask Student Aid FAQ Should I Consolidate my Student Loans - What are the Pros and Cons

Should I Consolidate my Student Loans - What are the Pros and Cons

If you are looking to consolidate your federal student loans with a Federal Direct Consolidation loan, you should consider the benefits as well as the cons.

The Benefits of Student Loan Consolidation

  • Simplify repayment by combining several loans into one (reduces the number of loan payments you need to keep track of each month)
  • Reduce the amount of your payment each month by increasing the term of the loan*
  • If you have a Federal Family Education Loan Program (FFEL) or Perkins Loan and would like to take advantage of some of the loan benefits offered in the Direct Loan program (e.g., certain income-driven repayment plans or Public Service Loan Forgiveness (PSLF)).
  • Change from a variable interest rate to a fixed
  • Remove a cosigner from your original loan
  • Choose your servicer. Borrowers who don’t like their current loan servicers can switch to a different one.

*NOTE: Increasing the term of your loan may increase the total interest paid over the life of your loan, but may also reduce the amount of your monthly payments.

The Cons of Student Loan Consolidation

  • Your overall interest rate will slightly increase. If you are consolidating in hopes of a lower interest rate, then you should reconsider your strategy. Your interest rate for a Federal Direct Consolidation Loan is not based on your credit score, but rather the weighted average of the interest rates on the loans you are consolidating rounded up to the nearest 1/8 of a percent.
  • If you are looking to lower your interest rate you may want to consider private loan refinancing.
  • If you have already been making eligible payments towards PSLF or forgiveness under one of the income-driven repayment plans, your eligible payments restart
  • You could lose borrower benefits on your underlying loans. For example, a consolidated Perkins loan will lose its interest subsidy and cancellation benefits (forgiveness options only available to Perkins loan).
  • A longer repayment term extends the amount of time you have to repay your loan but it may cost you more overtime.