College students relying on student loans to pay for college can easily graduate with 16 or more separate loans. Add a few new loans, interest rates and bills to that list.
Keeping tabs on every loan and figuring out exactly what is due each month can be tricky.
Consolidating those loans can eliminate some of the confusion, says financial aid expert Mark Kantrowitz, publisher of What you owe: Borrowers need to understand more than just their loan balance.
The National Student Loan Data System gives students a rundown of each federal loan by type and date disbursed.Most borrowers have a mix of subsidized and unsubsidized Stafford loans.Interest rates on these varied over the years, so check with your loan servicer – the one who sends the statements each month – to find out the rate on each loan and whether it is fixed.The interest rate on a consolidation loan is based on the average rate of all loans being consolidated.If borrowers combine low interest rate loans with those that have a higher rate, they could wind up paying more interest over time, says Deanne Loonin, director of the Student Loan Borrower Assistance program at the National Consumer Law Center.
"It plays out different ways for different people," Loonin says."Some people, particularly if they have subsidized loans at different interest rates, their interest rate could go up if they put them all together." While private loans cannot be consolidated under a federal loan, private lenders may be more than happy to take over your federal loans.That doesn't make it a good idea, says Betsy Mayotte, director of compliance for American Student Assistance, a nonprofit that helps students manage college debt.Graduates can have up to 100 percent of a Perkins loan forgiven if they enter law enforcement, join the Peace Corps, are deployed with the military or become a science teacher, among other things.Consolidating a Perkins loan with another loan could eliminate that option.Perkins, Stafford and Grad Plus loans offer income-based repayment options. Combining a Parent Direct PLUS loan with another type of loan can eliminate some of those flexible repayment options, says Loonin with the National Consumer Law Center.