July 22, 2008
Will consolidation lower my monthly payments?
In short, most likely. In most cases, you will pay less each month when you consolidate all your federal loans together. In some cases, for example if all your interest rates are identical and you have a low balance, you might not save much.
Consolidation loans take the weighted average of your loan balances times your interest rates to calculate your new rate. Then, depending on the balance, they extend the loan repayment time normally to 10 to 30 years.
You will likely pay more in the long run if you have a longer repayment period, but it’ll help you pay your bills right after college graduation.
Also, for federal loan consolidations, there are no early repayment penalties, so you can get all the low-payment benefits now then later when you have a higher salary put a bit more money towards the loan and pay it off early!
Here’s a calculator you can use to determine if consolidation can help you.