Pros and cons of consolidating federal student loans

If you consolidate your federal and private loans together, you may lose the protections a federal student loan affords, like deferment or forbearance, which allow you to temporarily postpone or reduce your federal student loan payments; income-based repayment programs; and potential loan forgiveness, like that offered to people who work in the public sector.

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When you consolidate your private and federal loans through a credit union or bank, you could be offered a rate that is lower than what you’re paying right now.

But, consolidating student loans is not right for everyone.

Perkins borrowers may have multiple outstanding loans, but many students also carry federal Stafford Loans, and others issued through the Direct Loan Program.

Students with multiple federal loans are increasingly concerned about how they will meet repayment obligations after graduation.

It should be noted, however, that extending repayment terms also adds more total interest to the loan, over its entire lifetime.

The number one drawback to consolidating a Perkins Loan is the loss of loan cancellation benefits.

Many lenders have expanded their portfolios of debt management tools to include lower-cost alternatives to student loan consolidation.

If you hold private loans, and are having a hard time making payments, consult with your loan representative to help evaluate your resources, debt obligation, and ability to pay.

The low-interest, fixed-rate loans are in-place to provide supplemental funding for students with extraordinary financial aid needs for college. Ford Federal Direct Loans provide general assistance for low and middle-income applicants.

Select, economically disadvantaged students are eligible for additional loans through the Perkins program.

Since it’s a big financial decision with long-term implications on your finances, we’ve put together a little pros/cons list that you might find helpful.

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