While loan consolidation can sometimes dramatically lower a borrower's monthly payments, Kevin Walker, co-founder of the college finance site Simple Tuition.com, says it can also cost you."The downside of getting a lower monthly payment is that you're going to subject yourself to substantially more interest charges over the life of the loan," he says.
The silver lining is that all federal consolidation loans and some private ones don't have prepayment penalties. " Bankrate's community sharing policy Bankrate wants to hear from you and encourages thoughtful and constructive comments.
Once the application is submitted, the federal government estimates that it takes 60 to 90 days to officially complete the consolidation process.
Consolidating private loans works in a similar fashion, as far as paperwork goes.
"That creates tremendous flexibility, especially for families applying for loans for multiple kids."Students consolidating federal loans can do so through the Department of Education's website at Loan gov, by phone at (800) 557-7392 or by downloading a paper application at Loan gov/borrower/and mailing it in.
Almost all types of federal loans can be consolidated.
Betsy Mayotte, director of regulatory compliance for the student debt assistance group, American Student Assistance, makes sure to tell borrowers to stay away from consolidation loans that combine federal and private loans.
Consolidating both types of loans excludes borrowers from federal protections.Should borrowers pay off their loans early, they can save hundreds, sometimes thousands, in interest charges."Would it be nice to have just one loan where you make that one loan payment every month? We ask that you stay focused on the story topic, respect other people's opinions, and avoid profanity, offensive statements, illegal contents and advertisement posts. Bankrate reserves the right (but is not obligated) to edit or delete your comments.Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.Instead of making multiple payments to multiple lenders, the borrower only has to pay off the new consolidation loan, says Michelle Pezzulli, vice president of operations for Credit Union Student Choice, a student lending service provider in Washington, D.C."That new loan will have its own interest rate; it will have its own repayment terms; it will have its own terms and conditions," she says.Regardless of how the market fluctuates, borrowers will never pay more than 8.25 percent on their consolidation loans.