While consolidating a student loan is a great solution for anyone looking for a way to manage their monthly payments, this may not necessarily be the right option for you. Before you choose to consolidate your student loans, ask yourself these questions:
Should I choose to lower my monthly payments?
The only way lower your monthly payments is by extending the term of your loan, which means you will end up paying much more by way of accrued interest by the time you have cleared your debt. If you can afford to stretch your finances, it is advisable to consolidate without extending the term of the loan.
Is an income-based repayment plan a better solution for me?
With an income-based repayment plan, your monthly payments are connected to your income. If your salary is on the lower side, you make lower monthly payments. The next year, your income is reassessed and your monthly payments are adjusted accordingly. Opting for an income-based repayment plan is a great way to ensure that you can afford your monthly payments, so you are not at risk of default. When you consolidate your federal loans, you will lose the option to choose an income-based repayment plan.
Do I intend to use the federal loan-forgiveness programs that I am eligible for?
Borrowers working as teachers in certain low-income schools, or in other public services may be eligible for loan forgiveness for some federal loans. You will forfeit this benefit if you choose to consolidate your student loans. If your future plans involve working in a field that qualifies you for loan forgiveness, consolidation may not be the right option for you.