Magnify Money is an advertising-supported comparison service which receives compensation from some of the financial providers whose offers appear on our site.
This compensation from our advertising partners may impact how and where products appear on the site (including for example, the order in which they appear).
To help ease the burden of student loan payments, many borrowers opt to consolidate or refinance their student loans.
You can use the following calculator to see what your interest rate would be after consolidation: Fin Aid Loan Consolidation Calculator The bottom line, though, is that student loan consolidation is NOT a route to a better interest rate.
You need to refinance if that’s what you’re after, and we’ll talk more about that below.
By consolidating and locking in those low rates, you can ensure that your loans won’t get more expensive over time if interest rates rise.
If your federal student loans are in default, which typically means that you have missed payments for 270 days, you can consolidate your loans to get out.
If you have two federal student loans with very different interest rates, you can pay them off faster and save yourself money by putting extra payments toward the loan with the higher interest rate first.
But if you consolidate those two loans together, you end up with a blended interest rate and lose the ability to pay off the higher-interest loan quicker.
In fact, it’s likely that your interest rate will increase by just a tiny bit.
When you consolidate, the interest rate of your new loan is the weighted average of all of the loans included in the consolidation, rounded up to the nearest ? What that means is that at best you’ll end up with the same combined interest rate that you had before, and at worst your interest rate will increase by about 0.125%.
While all of the above are good reasons to consider consolidating your federal student loans, here are four things to watch out for.
Consolidating your federal student loans won’t improve your interest rate.
This can be an incredibly effective way to avoid the negative consequences of default, such as your loan immediately being due in full, taxes and wages potentially be garnished, and a big hit to your credit report, among others.