Should I Consolidate my Student Loans?

Student Loan Consolidation 101: Everything You Need to Know

It’s pretty typical to feel overwhelmed with student loan debt. Seriously, anyone who doesn’t leave college or university with a huge bill hanging over his head should consider himself lucky. Before consolidating my student loan balance, I was actually spending more on college debt than I was on groceries and utilities combined!

Not only that, but as a recent grad in an economy that was still recovering, I was finding it pretty challenging to find a well-paying job in my field. I finally decided it was time to take matters into my own hands and began the process of refinancing. Not only did it save me money, but it helped me get back on my feet financially. So here is inside scoop on how to save money by consolidating as well as a few of the ins and outs of getting it done the right way.

Major Benefits of Consolidating

I was a bit skeptical of the whole process, so I decided to do a bit of research before diving in myself. These were some of the biggest benefits I found:

Lower interest rate.

A lower interest rate was one of the biggest drawing factors for me. A lower interest rate keeps more money in my pocket each month as well as over the lifetime of the loan itself. I also discovered that a reduced interest rate would help me pay off my loans faster.

Fixed-rate instead of variable.

Despite the initial attraction of a low variable rate loan, variable is not really the way to go because there is really no direction to go but up. So locking in a more reasonable fixed-rate loan can actually save money in the long run.

Lower monthly payment.

Most student loan repayment terms range from 5 to 20 years. Extending the term; however, can reduce the monthly payment significantly. I found this particularly helpful because it allowed me to set aside a little more in the case of an emergency rather than just shelling out my whole paycheck to student loans.

Flexible repayment terms.

Flexible repayment terms were another option I found particularly helpful. Some financial providers will actually base payments on one’s current income, which is projected to grow over time. As a recent graduate, this is really helpful because most graduates enter the field at an entry-level salary.

One easy payment.

Managing all of the different payments for all of my student loans was becoming a bit challenging. Consolidation became even more attractive when I realized I could roll all of my loans into one and just pay once a month.

A bank that cares.

Many borrowers find themselves frustrated or dissatisfied with the customer service that they receive from their current financial providers. In this case, refinancing may extend the opportunity to find a new bank with better customer service that is more vested in providing borrowers good options and effective service. Asking friends and family for suggestions in this regard is a great place to start.

What to Know Before Consolidating

I found it was extremely important to know all the details about consolidating before I set out to do it. These were a few of the points I found most helpful.


Depending on the terms of each loan, eligibility for consolidating varies. In most cases, loan holders are eligible to consolidate after graduation, or if they have left school or are enrolled less than half time.

Loan Type

Certain types of loans cannot be consolidated. For example, a private student loan cannot be consolidated into a Direct Consolidation Loan. However, most private lenders do offer consolidation options for private and federal loans. It’s also important to look at the current interest rate on the loan. For a loan that already has a low interest rate, private consolidation may not actually offer the best interest rate reduction.

Answering the Big Question

Even after considering all of the benefits and details, the big question still looms, “Should I consolidate?” Ultimately, the answer to that depends on a number of factors. The most important consideration in making that decision, as well as with any financial decision, is being aware of all of the options.

Weighing the pros and cons carefully is one of the first steps that needs to be taken. It’s also important to remember that there is no single “right” answer when it comes to consolidating. We all just have to consider the options and choose which one is the best fit for our particular financial situation.

Consolidating student loan debt isn’t necessarily a quick fix for cutting costs and saving money. However, if it is done right it can definitely save money in the long run and make the repayment process easier. Borrowers simply need to evaluate the different options available and choose one that works for them. That’s what I did, and I couldn’t be happier with the outcome.