Should I Consolidate My Student Loans? [Pros and Cons]

In keeping with Experian, the common pupil mortgage debt for debtors within the U.S. is round $39,487. Many debtors have a number of loans, together with federal and personal loans, from a number of mortgage servicers. On this case, managing month-to-month funds can get difficult. Pupil mortgage consolidation is a technique to assist simplify issues. 

Right here’s what to find out about consolidating your pupil loans and whether or not it is sensible for you. 

What’s Pupil Mortgage Consolidation?

It’s attainable to consolidate federal and personal pupil loans, both with a Federal Direct Consolidation Mortgage or via a personal lender. Pupil mortgage consolidation entails changing a number of present loans with one new mortgage. So as an alternative of monitoring a number of month-to-month funds, you solely have to concentrate on one. Ideally, this new mortgage additionally has a decrease rate of interest than you had beforehand. 

Varieties of Pupil Mortgage Consolidation

Relying on the kind of pupil loans you might have, there are two choices for pupil mortgage consolidation:

Direct Mortgage Consolidation: Federal pupil mortgage consolidation is offered with a Direct Consolidation Mortgage via the U.S. Division of Training, and it means that you can consolidate a number of federal pupil loans totally free. This feature shouldn’t be out there for personal pupil loans.
Non-public Pupil Mortgage Consolidation: Non-public pupil mortgage consolidation is offered via non-public lenders, like banks or credit score unions. You possibly can choose to consolidate present federal loans and personal pupil loans.  

The Execs and Cons of Pupil Mortgage Consolidation 

Whereas consolidating your pupil loans could make it simpler to handle your funds, there are another professionals and cons to think about earlier than you progress ahead with the method. That is very true in case you’re contemplating consolidating federal loans with a personal lender. Right here’s what to know. 

Execs of Federal Pupil Mortgage Consolidation

One fee: As talked about, an enormous advantage of mortgage consolidation is that you just’ll solely have to handle one federal pupil mortgage fee as an alternative of a number of. Along with having the ability to consolidate your Direct backed or unsubsidized pupil loans, it’s additionally attainable to consolidate Father or mother PLUS loans. 
Retaining federal advantages: When you consolidate your federal loans with a Direct Consolidation Mortgage, you’ll retain potential advantages like federal pupil mortgage forgiveness and get the choice to qualify for an income-driven reimbursement plan. 
Decrease month-to-month funds: Chances are you’ll find yourself with a decrease month-to-month fee in case you go for a mortgage with a long term. Phrases of as much as 30 years can be found with Direct Consolidation Loans. 

Cons of Federal Pupil Mortgage Consolidation

Paying extra in curiosity: When you select a longer-term Direct Consolidation Mortgage, you could possibly find yourself paying extra in curiosity over time. 
Shedding progress towards mortgage forgiveness: The federal Public Service Mortgage Forgiveness Program means that you can qualify for mortgage forgiveness when you’ve made 120 consecutive funds. When you consolidate your loans, your progress could also be misplaced. 

Execs of Non-public Pupil Mortgage Consolidation

One month-to-month payment: Once more, you’ll get pleasure from one month-to-month fee with non-public pupil mortgage consolidation. This may be useful in case you’re managing a number of federal and personal mortgage funds every month. 
Selection of lenders: Many non-public lenders provide pupil mortgage consolidation, additionally known as pupil mortgage refinancing. So that you’ll be capable to evaluate choices and select the lender that provides the absolute best charges and phrases.
Doubtlessly decrease rate of interest: Although not at all times, it is likely to be attainable to get a decrease price if you consolidate present loans with a personal lender. 

Cons of Non-public Pupil Mortgage Consolidation

Prolonged mortgage time period: When you select to consolidate with a personal pupil lender, you could possibly find yourself with an extended mortgage time period. Whereas this may occasionally imply a decrease month-to-month fee, it additionally means you’ll be paying off your loans for an extended time.
Larger curiosity funds: An extended mortgage time period may additionally imply that you just’ll pay extra curiosity over the lifetime of your mortgage. 
Sacrificing potential advantages: Once you consolidate federal loans utilizing a personal mortgage, you’ll hand over potential advantages like attainable pupil mortgage forgiveness or a extra reasonably priced reimbursement plan. 

Is Pupil Mortgage Consolidation a Good Concept? 

Pupil mortgage consolidation will be a good suggestion in case you’re struggling to handle and observe your month-to-month funds or you might have high-rate loans. Consolidating will present the advantages of a single—and doubtlessly decrease—month-to-month fee. But it surely’s necessary to weigh the professionals and cons of consolidation to find out if it’s your best option for you. 

When you resolve to maneuver ahead with consolidating, make sure you do your due diligence to keep away from pupil mortgage consolidation scams. Usually, pupil mortgage consolidation is one thing you are able to do by yourself totally free, so be cautious of corporations that attain out and request fee in alternate for consolidating your loans. Additionally, be careful for robocalls and calls from people claiming that they’re with the U.S. Division of Training. 

Pupil Mortgage Consolidation vs Refinancing 

Chances are you’ll hear the phrases ‘pupil mortgage consolidation’ and ‘pupil mortgage refinancing’ used interchangeably. Whereas the 2 ideas are comparable in that they’ll substitute a number of loans with one, there are some necessary variations between pupil mortgage consolidation vs. refinancing. 

When you’ve got federal loans, you’ll be able to choose to consolidate them with a Direct Consolidation Mortgage. You can not consolidate non-public loans with a federal mortgage. Once you consolidate your loans this manner, you’ll retain your federal pupil mortgage advantages, akin to potential mortgage forgiveness. Whereas simplified month-to-month funds and retaining federal advantages are positives, you in all probability gained’t get a decrease price if you go for a Direct Consolidation Mortgage. Your new mortgage price is the weighted common of all of your earlier charges rounded as much as the closest 1/eighth p.c. 

Non-public pupil mortgage consolidation, usually known as refinancing, can also be an possibility. With this selection, you’ll be able to consolidate federal and personal loans and luxuriate in simplified month-to-month funds. You might also profit from a decrease rate of interest, relying on the lender you select. However you gained’t retain your federal pupil mortgage advantages in case you consolidate or refinance with a personal lender. 

Regardless of potential drawbacks, it may make sense to refinance with a personal lender if doing so will simplify your funds or lead to a decrease, extra manageable month-to-month fee because of a long term. Once more, weighing the professionals and cons is necessary earlier than you progress ahead. 

Consolidate Your Pupil Loans with ELFI

When you’ve determined to consolidate your pupil loans, ELFI gives mounted and variable consolidation loans with low charges and versatile phrases. You’ll want a gentle earnings and a credit score rating of 680 or above to get authorised. Alternatively, you could possibly additionally work with a cosigner that meets these necessities in case you’re involved you gained’t qualify by yourself. Pupil mortgage consolidation with ELFI is usually a nice selection if you wish to simplify—and doubtlessly cut back—your month-to-month pupil mortgage funds.