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.
Regardless of how the market fluctuates, borrowers will never pay more than 8.25 percent on their consolidation loans.Private loans can typically only be consolidated with other private loans.Even if your rates seem high, t he Department of Education puts a cap on consolidation loan rates at 8.25 percent.One major advantage of federal consolidation loans is that borrowers don't need a stellar credit score to qualify, they can apply any time (even if their loan is in default) at Loan gov, and they'll always get a fixed interest rate.
Here's what you need to know before deciding to consolidate student loans.
Loan consolidation is when a borrower takes out a new loan to pay off several smaller student loans.