Student Loan Consolidation Can Never Hurt You

You will hear me harp over and over about consolidating your student loans.  There are several reasons why you need to do it.  For one, it will lock you into a fixed rate for the life of the loan.  Second, you only have to pay one payment per month, rather than several different ones.  Lastly, it just makes sense, because there are no hidden fees or catches associated with it. 

One sight that some of my friends have used is Student Loan Consolidator that helps walk you through the loan consolidation process.  They seem to have a good customer service department to explain the process.  I went directly through Direct Loan Services and it was a fairly easy process.  All you need to do is find out all of your student loan numbers and the amounts that you owe.  Then, you’ll be able to consolidate them all to one lump-sum loan.  There is typically no loan consolidator that is significantly “better” than the other.  But each one has their own incentives for lowering your interest rate.  Be sure to pay on time for at least a year and then you can ask for an interest rate decrease.  Also, they will usually lower your rate if your sign up for EFT, but I do NOT recommend this, because you never want to give your creditors access to your bank account.  You need to eat and have electricity before you pay creditors. 

The reason that I am sold on student college loan consolidation is that when I did it, I locked in a 2.75% rate.  I know that the rates are much higher now, but that does not mean that you should not lock in a rate now.  Usually rates do not jump back down significantly, so I would try to salvage what you can now just in case the interest rate keeps rising.  You can listen to my soap box someday about how I think it is criminal to penalize college graduates with higher interest rates when the government is just bad at handling money.  That’s another battle for another day.  Anyway,  I hope this helps. 


  • Financial Aid Officer

    Great info – I have been meaning to consolidate my student loans and I will check out that site!

    • Guest

      Every loan I have is at 6.8% even though they were all federal loans given to me while was steadily employed with a 725+ credit score. Consolidation would cost me money in the interest rate hike they charge. Sadly, my credit card has a better rate than my student loans, and no it is not an introductory rate. My actual rate is 5.15%, this system is incredibly poorly done right now and it honestly deters people from college. I can not adequately express my frustration at a system that charges more than a credit card for a federally backed loan. This is outrageous.


    Word of Caution: When I was 25 yrs old and out of grad school, I was advised to consolidate my student loans for the same reasons mentioned in this blog. So I consolidated them (to my dismay) with a private loan servicer at a very low interest rate. I later got a job in local government. My student loans would have been forgiven or at least partially forgiven had they kept their Federal Loan status. However since they were consolidated to a private servicer, I’m stuck paying off thousands of dollars more than I would have been had I not consolidated.

    So what I’m saying is proceed with caution. Yes it is a good idea to consolidate for the reasons mentioned in this piece, but by all means try to consolidate with the Federal Loan people so that it doesn’t lose it’s Federal status.

  • Aefjg

    it can hurt you FUCKWAD. i consolidated at 8.5% then COULD NEVER refianace.

  • Anonymous

    I completely disagree. I consolidated my graduate student loans in 2006 when rates were 8%. Most people do NOT understand that you can NEVER reconsolidate when rates fall! Who knew then that the housing bubble was going to burst and rates were going to fall to almost nothing? I’m so sorry I consolidated. I don’t know why they do this, but it’s bogus considering we’re paying double or triple the available rates to others. Unfair!

  • The TechReader

    This isn’t true because when you consolidate, now they can charge interest on your interest because it causes your interest to now become part of the principal!

  • capacitated

    I’m in the process of consolidating two loans in default, with Income Based Repayment (IBR). My low income qualifies for a monthly payment of zero, with any remaining balance forgiven after (?) 25 years.

    My basic options are to pay zero as long as I qualify for that – I have an outstanding judgment I’d like to resolve with an eventual discounted lump sum – or to pay monthly the accruing interest (thereby avoiding balance creep) or to pay some greater amount (thereby reducing the principal).

    What (approximate) incremental effect would each of these options have on my credit score?