College Life

Top 6 things to consider before consolidating your student loans

Consolidating Student Loans

So, you’ve graduated from college. You’ve taken out student loans in the process, and now it’s time to pay them back. Fortunately, you have some options. Consolidating student loans can lower your monthly payment and make your loans easier to keep track of, and it’s easy to get started. Here’s a few things you should consider.

Do you have federal or private student loans?

Both types can be eligible for consolidation, depending on the lender, however, it’s important to recognize the difference. Federal loans usually have some of the lowest interest rates available so refinancing them with a private lender may not make financial sense. Additionally, some federal student loans may offer loan forgiveness and you may forfeit that benefit by consolidating them with private student loans. Do your homework and be sure you’re aware of any borrower benefits with your federal student loans. If your interest is high and/or you don’t plan to take advantage of any of the borrower benefits, consolidating can help organize your debt and significantly benefit your monthly budget.

How much you can afford to pay each month.

Consolidating your loans may improve the cash flow in your monthly budget in two ways. First, if you can get a longer repayment period, it likely makes your monthly payments lower and more manageable. Second, you could qualify for a lower interest rate depending on your credit score and other factors; this lowers your minimum payment and also saves you money on interest in the long run. If you find yourself with a lower monthly payment after your consolidation application, celebrate, and then confirm which was the cause – a longer term or a lower interest rate – and be sure you’re comfortable with whichever is the case.

If you have more than one loan.

You might have a mix of student loans with different lenders and terms. It gets confusing keeping track of the different interest rates, minimum payments, monthly due dates and your total debt. You may have even missed monthly payments because of it. Consolidating makes repayment easier by giving you just one monthly bill and unified terms.

Whether your loans have a fixed or variable rate.

If your student loans have a variable rate, your interest rate and payment fluctuates with the market based on the economy, while with a fixed rate your payment never changes. Variable rates can be hard to budget with, but may offer the benefit of a lower payment. Deciding whether you prefer a fixed or variable rate depends on your tolerance for risk. It’s also important to note that not everyone will qualify for both options. By consolidating your loans, you may be able to switch your variable rate loans to a fixed rate, or vice versa, depending on your preferences and other factors.

If you’ve been working toward Public Service Loan Forgiveness.

This is available for high need jobs in low income areas through the William D. Ford Federal Direct Loan Program. If you’ve been making payments toward Public Service Loan Forgiveness, consolidating your current loans will cause you to lose credit for the payments made. This also applies toward income-driven repayment plan forgiveness. You may want to rethink consolidating these loans if you fall in this category.

Whether there are hidden costs, like origination fees or early payoff fees.

With an iHELP loan, the term, rates, structure and repayment options are reviewed with borrowers. There are no surprise origination or early pay off fees. The iHELP program was built on integrity. Start with our easy online application or get pre-approved in under 2 minutes.

Life is busy, especially after college. If you’re struggling to make the minimum payments or stay on top of your debt, consolidating may be the option for you. Check out more of our free resources about student loan consolidation and how to pay off your loans even faster.

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