Direct Consolidation Loans are one single loan that you end up with if you choose to combine multiple federal student loans.
Advantages of Direct Consolidation Loans
The main reason why students combine their federal student loans into a single Direct Consolidation Loan is convenience. Borrowers who refinance and consolidate their loans only have to keep track of one deadline and make only one payment every month instead of dealing with multiple deadlines and multiple payments, which can get overwhelming.
In addition to being convenient, loan consolidation also lowers your monthly payments making it easier for you to meet your financial commitments so you are at lower risk of late payments and default.
Drawbacks of Direct Consolidation Loans
Consolidating makes your loan repayment strategy simpler. However, it does have a few disadvantages that you should take into consideration.
Lowering your monthly payments typically means extending your repayment term. This means you will end up paying more by way of interest over the life of the loan.
Another drawback is that you will lose out on any benefits you are entitled to under the terms of the original loan, including your eligibility to apply to the student loan forgiveness program.
Is A Direct Consolidation Loan The Right Choice For You?
It is advisable to take time to weigh the pros and cons of Direct Consolidation Loans. Only choose this option if it works for you, and keep in mind your long term goals.
If you’re looking to refinance or consolidate your private student loan, be sure to give our guide a look!