When Should You Consolidate Your Student Loan Debt? - Carlos Scarpero, VA Mortgage Specialist, NMLS #1674385

When Should You Consolidate Your Student Loan Debt?

This is a guest post from Andy Kearns at Lend Edu

The costs of higher education have grown exponentially in the last few decades, and they aren’t coming down anytime soon. Many recent graduates find themselves struggling to make ends meet especially when they are in an entry-level position with student loan payments due.

Not paying your loans can have massive consequences on not only your loan balances through fees and penalties or even default status, but on other facets of your life as well. In fact, a defaulted federal student loan can result in a poor credit rating, being denied further credit, or even being denied on a rental or employment application. In some cases, your federal income tax refund can be seized and applied to your defaulted loan. Even so, however, some students simply can’t afford their payments.

Since most students have multiple student loans, consolidating them into one monthly payment can seem like a great idea. Finding the right lender or consolidation loan, however, can be a bit tricky. Whether to do a consolidation—and how—usually depends on the types of loans you have and where you plan to consolidate.

What is Student Loan Debt Consolidation?

Most student loans are through the federal government and even if you have multiple federal student loans, you can consolidate all of them into one loan. Instead of making several monthly payments at multiple interest rates, you’ll now have one loan, one interest rate, and one monthly payment.

One of the largest benefits of having federal student loans is the variety of consolidation and repayment schedules available. You can see up front how each option will affect your payment amount and even the overall amount you will pay over the life of the new loan. You can also choose to use a private lender to refinance your loans. Like consolidation, refinancing allows you to combine multiple loans, payments, and due dates into one. Private lenders, however, typically have higher interest rates than federal student loans. If you’re putting federal loans into one under a private lender, you’ll probably pay much more overall.

The Pitfalls of Consolidating Student Loan Debt

There are other drawbacks to consolidation that you should be aware of. If you refinance or consolidate to a longer term, you may end up paying more in interest over the life of it. In general, the longer you take to pay, the more you’ll have to pay, unless you can secure a much lower interest rate by refinancing.

In addition, federal loans come with several perks and benefits that you will give up if you decide to refinance with a private lender. The possibility of loan forgiveness or discharge is one of those perks; once you refinance, you cannot take advantage of those programs. If you think you may want to apply for loan forgiveness based upon your public service employment, you should not refinance your loans.


Even with its drawbacks, student loan consolidation can be a great way to help ease the financial burden during your first few years out of school. If you find yourself unable to make monthly payments or

having a hard time meeting the student loan obligation, consolidation and refinancing could be excellent options. Just be aware of the potential pitfalls and have a plan to either avoid or mitigate them.


About The Author

Andy Kearns is a Content Analyst for LendEDU and works to produce personal finance content to help educate consumers across the globe. When he’s not writing, you can find Andy cheering on the new and improved Lakers, or somewhere on a beach.

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