WARNING: DON'T MAKE THIS STUDENT LOAN CONSOLIDATION MISTAKEThe first big problem that can happen with student loan consolidation is that, since you can consolidate just about every type of Federal student loan, you can accidentally put a loan type in your new consolidate loan that prevents you from having certain repayment plans. You can't transfer it to them, and you can't allow them to consolidate the PLUS loan into their loan.
The most common problem involves PLUS Loans Made To Parents. However, if you're a parent with other student loans in your name, and now you have this PLUS loan, you could potentially add it to your other loans via consolidation.
Especially so when you have your loans scattered between different student loan servicers.
It's not unheard of for graduates to end up with 5-6 different student loans, sometimes at different loan companies.
Here’s an example: If your payments currently come to a total of 0 across multiple accounts and you apply for a debt consolidation loan, that payment could come down to say 0.
Now you are paying just one payment of 0 per month (plus any applicable tax) instead of twice the amount like you were paying before.
Your new consolidation loan gives you choices in repayment plans – you could switch to an income-based repayment plan, or the extended plan.
If you switch to any other repayment plan, you will end up paying more over the life of the loan.
Immediately at consolidation, your new consolidation loan will be essentially equal to the sum of all your existing loans.
If you can manage to add, say, an extra and pay 0 each month, you could in fact offset the time disadvantage that is introduced by paying less money towards your student loans.
Note: This doesn't apply to Spousal consolidation loans.
If you take out a different loan each year of college, maybe a couple summer sessions - you could have a variety of loans at different places.
In such instances, it may be worth it to consider a student loan debt consolidation loan (a mouthful isn’t it?