When should I consolidate my student loans?

    Published: 06-16-2009
    Views: 14,253
    Justin Draeger with the National Association of Student Financial Aid Administrators explains the best time to consolidate your student loans.

    Host: When should I consolidate my student loans?

    Justin Draeger: Student loans can be consolidated any time after you are out of school, so anytime during repayment or during your grace period, that period is time after you end school before you actually have to start making payments. They are couple of things that you want to consider when you are consolidating your student loans, there are several advantages. For one thing when consolidating a student loan, you will have a fixed interest rate that means even your loans at variable rates will all be combined into one loan with a fixed rate. Another advantage is having one loan and one loan repayment. This will be particularly advantageous to borrowers at a multiple student loans with multiple lenders. They will be able to have one single payment with one lender. Another advantage is that sometimes with loan consolidation you can have additional repayment plan options. So you are not locked into just the standard loan repayment. You might have additional options and additional benefits by consolidating. And finally, it resets you the deferment and forbearance time frames.

    These are the periods of time that you can take when you have economic hardships or other reasons why you can't make a student loan payment a consolidation will actually reset those times. So if you have used all your available deferments and forbearances, a consolidation loan will reset those, so you can start over. There are a couple of other things that you will want to consider before consolidating. First of all, if you do consolidate, you need to be aware that you will lose borrower benefits that they have on all of your other student loans. So student loans that are taken and then consolidated into one loan will lose any borrower benefit like a interest rate reduction or any other advantage that you are currently getting. The second thing you will want to consider is it is almost always better to consolidate once you are in repayment unless you are trying to avoid an interest rate rise which happens in July consolidating during your grace period will actually cut your grace period short. So if you consolidate in months three of your grace period, your payments will begin to do in month four, you will no longer have a grace after that.