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Consolidation provides grads with the ability to combine their student loans into one megaloan, but it comes with drawbacks.
Along with gaining a new degree, many graduates will also leave campus with new student loan payments they’ll have to fit into their post-graduate budgets.
“If the terms you’re going to get are the not as generous as the terms you already have, consolidation is probably not a good idea,” she says.
Regardless of whether consolidating federal or private loans, there is a catch.
These include deferment — the ability to suspend payments under certain circumstances such as serving active military duty, attending further education or unemployment — and forebearance, which allows borrowers to postpone payments while still accruing interest, in cases of financial hardship.
This can be attractive to borrowers because the consolidation frequently results in longer repayment periods and lower monthly payments.
But borrower protections and repayment options on private consolidation loans can vary wildly from lender to lender.
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.
Almost all types of federal loans can be consolidated.
Borrowers should have loan account numbers, estimated payoff dates and contact information for each of their loans’ holders ready.