Is It Better to Consolidate My Student Loans?

Graduates who wonder, “is it better to consolidate my student loans?” have to look at their individual situations before answering that question. Each situation is different, and a lot depends on the current interest rate, whether the rates on your loans were variable or not, and how much you have left to pay.

So, Is It Better to Consolidate My Student Loans?

If you federal loans with variable rates like a variable rate Stafford loan, then you should look into the possibility of consolidation. “Is it better to consolidate my student loans if they’re variable rate loans?” In this case, the answer is very often yes. That’s because by consolidating them you lock in a single rate. Not only does this give you a predictable monthly payment it simply saves you money.

The only drawback to locking in a rate is if it you lock in a rate and then the rate drops. You won’t be able to benefit from that lower interest rate. Instead, you must pay the rate you locked in when you consolidated the loans. But if the interest rate goes up, no matter how high it goes or how much it fluctuates, you’ve locked into one rate and it cannot raise, no matter what the market does.

“Is it better to consolidate my student loans now or wait until the rate drops?” is also a common question. Watch the experts to see what they say about interest rates, and whether they expect them to raise or lower. If they agree that the rate will probably lower mid-year (July 1st) then you may save more money by waiting for the drop before consolidating your student loans.

If you already have a fixed rate loan, then consolidating could still save you money though it more than likely won’t. However, if you look into consolidation and it’s going to lower your interest rate by one point or more, then it’s worth it to consolidating.

Also, it can be very helpful to consolidate simply to combine your loans into one and make one monthly payment instead of several. You can also end up with a lower monthly payment that all of your previous loan monthly payments combined, though you’ll have to pay longer. If you have several variable loans or fixed rate loans and consolidate them at a low locked-in rate, then the clear answer to, “is it better to consolidate my student loans?” is yes.