Start Consolidating private and federal student education loans

Consolidating private and federal student education loans

While loan consolidation can sometimes dramatically lower a borrower's monthly payments, Kevin Walker, co-founder of the college finance site Simple Tuition.com, says it can also cost you."The downside of getting a lower monthly payment is that you're going to subject yourself to substantially more interest charges over the life of the loan," he says.

C."That new loan will have its own interest rate; it will have its own repayment terms; it will have its own terms and conditions," she says.

Consolidation provides grads with the ability to combine their student loans into one megaloan, but it comes with drawbacks.

Along with gaining a new degree, many graduates will also leave campus with new student loan payments they'll have to fit into their post-graduate budgets.

This can be attractive to borrowers because the consolidation frequently results in longer repayment periods and lower monthly payments.

When it comes to consolidation, the types of loans you have matters, but most federal loans, including Stafford, Perkins, Direct Plus and Supplemental loans, can be consolidated with other federal student loans."The interest rate on (federal) consolidation loans is an average of the interest rates on the (federal) loans you're consolidating," says Ken O'Connor, director of student advocacy for Fynanz, a New York City firm providing technology for the private student loan market.

Betsy Mayotte, director of regulatory compliance for the student debt assistance group, American Student Assistance, makes sure to tell borrowers to stay away from consolidation loans that combine federal and private loans.

Consolidating both types of loans excludes borrowers from federal protections.

Most also have limits on how much you can consolidate.