Student loans - Consolidate and Lower Monthly Payments

College graduates sometimes find themselves juggling multiple student loan payments. These payments can end up draining bank accounts and ruining finances. Finding a way to consolidate those student loans can help graduates manage their finances better and lower their monthly payments.

Federal Student Loans

Among the loans that can be consolidated are the Stafford, Perkins, and PLUS. A federal student loan consolidation allows all outstanding balances to be combined into one loan. Students and parents who have at least $20,000 in federal loans are eligible to apply. Many federal student loans must be repaid over a 10 year period. Consolidating loans can allow borrowers to extend the terms up to 30 years. Other reasons to consolidate student loans include:

  • Lower monthly payments
  • A flexible repayment plan
  • The ability to lock in a low interest rate.

When to Consolidate

Students can consolidate loans during their six-month grace period or while they are in periods of repayment, forbearance, or deferment. Parents can consolidate PLUS loans any time after the funds have been disbursed. That is regardless of whether or not their child is still enrolled in school. Loans for multiple children can be consolidated into one loan as well.

Comparing Loan Packages

It's important to evaluate all of the benefits that come with consolidating student loans. Of course the interest rate on the loan is important to look at. Borrowers who have loans with variable rates may come out ahead by consolidating into a fixed-rate loan. Some lenders may offer a 1 percentage-point rate reduction after 36 on-time payments have been made in a row. Other lenders may offer a rate reduction if borrowers have payments withdrawn from their bank account.

What about Private Loans?

Private student loans should not be consolidated with federal loans. Federal consolidation loans generally have lower interest rates that aren't available for private loans. Private consolidation loan rates are based on credit scores. So if a person's score has improved since they obtained the original loans, he or she may qualify for a lower interest rate.  People who have seen their credit score increase by at least 50 points may want to shop around for a better deal with a different lender. They also can try negotiating a better interest rate with their current lender.

Borrowers who choose to consolidate student loans should reap the benefit of lower monthly payments and a better interest rate. However, extending a 10 year loan to 30 years may mean paying more interest over the life of the loan.


Student Loan Solutions
USA Today
"Consolidate student loans only if it's right for you," by Sandra Block,

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