For example, if you have Parent PLUS loans for a child and individual loans that you took out for your own education, you shouldn’t consolidate them, says Adam Minsky, a lawyer in Boston who specializes in student debt.
That’s because Parent PLUS loans are not eligible for several types of income-driven repayment, and they carry that restriction with them in a consolidation, causing your student loans to lose those options, as well. Consolidation can affect your eligibility for forgiveness.
So, for a simplified example, if you have two loans, one for ,000 at 4% interest and one for ,000 at 6%, your consolidated loan will have a ,000 balance and a 4.7% interest rate.
By combining your interest rates, you also lose the ability to employ a favorite tactic of financial planners for paying down debt: targeting the most expensive debt, the loan with the highest interest rate, first.
Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns.
Student Loan Hero is not a lender or investment advisor.
But that hasn’t been the case for the past decade, since the government stopped issuing student loans with variable rates.
Instead of multiple payments throughout the month, you can have a single – and sometimes lower overall – monthly payment.
College students can take out new loans each year they’re in school, so by the time graduation comes, it’s common to have half a dozen, or more, individual loans.
Each of them may have different terms, including interest rates.
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