Historically, that may have been accurate, since consolidation was often used as a way to lock in a low interest rate on variable-rate loans, says financial aid expert Mark Kantrowitz.
But that hasn't been the case for the past decade, since the government stopped issuing student loans with variable rates.
A common misconception is what exactly student loan consolidation and student loan refinancing are, how they are different, and which might be the best choice for a borrower to alleviate some of his or her student loan burden. Loan consolidation means combining multiple loans into one single loan.
This is done mostly for convenience, to simplify the process and only make one monthly payment.
After 180 days, you will need to apply for a new Direct Consolidation Loan.
Request to Add a Loan to an Existing Federal Direct Consolidation Loan Mail your completed form to: Navient - Department of Education Loan Servicing Attn: Loan Consolidations Originations P. Box 6180 Indianapolis, IN 46206-6180 The interest rate is calculated by the weighted average of the interest rates of the loans consolidated, rounded up to the nearest 0.125 percent.
Consolidation gives you the opportunity to choose one of the U. Department of Education's consolidation servicers (of which, Great Lakes is one) to complete and service your Direct Consolidation loan.Depending upon the total balance you are consolidating, you may extend the repayment period for up to 30 years with consolidation.The extended period makes the monthly payment amount more manageable; however, the longer your loans are in repayment, the more interest you will pay over the life of the loan.Consolidating those loans into a single new one can simplify your payments, especially if your loans are with different loan servicers, the companies that oversee your payments.It can also be a way to get into repayment plans you otherwise wouldn't be eligible for.1. One of the myths of consolidation is that it makes your debt less expensive by lowering your interest rate.If you consolidate your loans now, your new rate will be based on a weighted average of all your loans' interest rates.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.Federal student loan borrowers have the option of consolidating their loans via the Direct Consolidation Loan program offered by the U. That loan is then serviced by the servicer of your choosing – of which Nelnet is one! Consolidating allows you to merge multiple eligible loans into a single loan.Loan consolidation can be helpful for borrowers who want to combine their eligible federal student loans into a single Direct Consolidation Loan.It's important to understand and carefully consider all factors before consolidating.