How to Consolidate your Student Loans

 Photo by  Brooke Cagle  on  Unsplash

Photo by Brooke Cagle on Unsplash

When I graduated college, I had four different loans with two different lenders. That means I had four different payments to make each month. Each of them was different amounts at different interest rates, both fixed and variable. That’s enough to give anyone a headache. Imagine if I could have just made one single payment to one lender each month instead of juggling variable numbers around for a few years?

There are a few different ways to do this.

If your student loans are with different lenders, they are often different types of loans. Unfortunately, you can’t simply throw all of them together. Your loans are either federal or private. Federal loans are much more common than private, this is preferred. Private loans are often more difficult to come by; they require cosigners or a high credit score. They also have higher interest rates, which deters many students from applying in the first place.

Federal loans are a little easier, but they also come in different shapes and sizes. They are government funded and universally have lower interest rates. Federal loans require no credit check or collateral, and they can also be consolidated upon graduation.

There are two types of federal loans, Stafford and Perkins. There are also two types of Stafford loans, subsidized and unsubsidized. Did I lose you? Stay with me.

Subsidized – You’re not responsible for making payments until after you graduate, and the government covers your interest until then. To qualify for a subsidized loan, you must prove financial hardship. You can only borrow so much per year, and the amount is income based on either your or your family.

Unsubsidized – Your payments are deferred until graduation, but you’re responsible for all your interest on this one. However, all students qualify for this type of loan, and the dollar amount is a much larger range. This is the most common type of student loan.

Perkins loans – This program ended in September 2017, but it’s possible you may have one in your arsenal. Perkins loans were more sought after than Stafford loans because the government covered your interest until graduation and they provided a grace period of nine months after graduation until payments were needed. They also guaranteed a fixed interest rate of 5% while Stafford loans were commonly higher based on credit score.

If you graduate college with only Stafford subsidized loans and Stafford unsubsidized loans, you qualify for direct consolidation. This is here to make your life much easier. You can consolidate anywhere from 2 to 100 loans into one single payment to one lender. They’ll take an average of all your interest rates and help you choose a repayment option that comfortably fits your lifestyle. It is free to consolidate, but you can only do so once.

While this is the best option for some, it may not be for others. Do your research and educate yourself on your interest rates and last payment date on your loans. I’ll preach consolidation for people with an unmanageable amount of loans with countless lenders. However, after a bit of research, this was not the best option for me.

I advise visiting StudentLoans.gov to see if you are eligible for student loan consolidation. You’ll need your Federal Student Aid ID to start, and all details involving your student loans. They’ll want to know your interest rates, types of loans, amounts, and period of repayment. The application will let you choose a repayment option that comfortably fits your lifestyle. This will allow you to choose a monthly payment that you can afford and a period of repayment that will allow you to pay off your loans in a reasonable amount of time. It’s important to find a happy medium here. You shouldn’t choose a lower payment than you can afford because you’ll end up paying more interest in the long run. Be honest with yourself and see what your budget really allows. You went to college and took the loans; it’s your responsibility to pay them off.

Between the time of application and approval, you will still be responsible for making payments on all necessary loans as to not hurt your credit score. Upon approval, you will only be responsible for the single payment through one lender.

Consolidating your loans can be a blessing or a curse. Make sure to do your research and ask questions before you commit to anything you aren’t sure of. This is a program meant to help you, make sure it’s an asset to you before signing the dotted line.


Per usual, I owe all my correctly spelled words to Zack Mathis