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When it comes to student loans, consolidation can drastically change your life.

It can help borrowers lower their monthly payments, acquire fixed interest rates, have the convenience of making only 1 payment per month and even get further discounts on rates just for automatic payments.

 I’ve seen the benefits first hand and was able to cut my student loan repayment obligation by half by consolidating to Sofi.

And honestly, I can’t express the joy I felt transforming my student loans from being a stressful burdensome debt that kept me up at night to a manageable payment that I have no worries about – see the details of my story,

But just because it’s a good plan that works for most people, doesn’t necessarily mean it’s a good plan for you.

You have to look at your specific situation, and your motivations to determine if it’s right for you, otherwise, you could lose benefits that you currently have a miss out on less apparent opportunities.

A consolidation is a good option for you if have one or more of the following situations:

  • you have high-interest rates – over 10% and can get a lower rate
  • you have variable interest rates
  • you have good enough credit (think 680 or better) to get a good interest rate anything under 10% (the lower rate the better)
  • you want to remove a cosigner
  • you have a steady income to make your payments. You would have to make the payments, anyway, consolidating doesn’t eliminate your payments, and now you might have one big bill (depending on how much you owe) instead of a few smaller bills

Consolidation might not be right for you if:

  • your student loans are fixed and under 5%. At that rate, you’re in a pretty good place and there isn’t much that can be done to make your interest rate better
  •  consolidating will raise your interest payments
  • If you are trying to take advantage of loan forgiveness. Some federal loans, notably Perkins Loans, have loan cancellation if you meet certain requirements. Those benefits could go away if you consolidate the loan. For example, police, firefighters, and teachers can have 100% of a Perkins loan forgiven if they meet certain conditions. That opportunity could go away if the Perkins loan becomes part of a Federal  Direct Consolidation Loan.
  • you are in the first 6 months “grace” period. Borrowers typically get a six-month window before having to start repaying student loans. That goes out the door when you consolidate your loans
  • you’re almost done paying it off. It might not be worth consolidating into a longer repayment period if you only have a few more years left to pay. It may be just as easy to pay a little extra and clear the debt faster
  • if you might need income driven payments later. Since you can only refinance with a private lender, you’ll no longer hold federal student loans. As a result, you’ll lose access to helpful federal programs, such as income-driven repayment.

Now it may not sound like much. That the cons outweigh the pros. You might even be thinking “what difference does it make, you’ll still owe the debt.” but check out the numbers.

Let’s say you have a private student loan of $25,000 and signed up with an 8.9% interest rate for 10 years.

Your minimum payment would be $315 per month. With ~ $130 going towards your principal and a whopping $185 going to interest. More than half the payment is sucked up in interest alone!

If you kept making the minimum payment for the 10 years, you would have paid over $12,000 in interest alone.

That’s almost half of what you borrowed! And in total, you would pay back nearly 150% or $37,841.

Now, if you could get that interest rate lowered to say … 4.5%.

Then not only does your monthly minimum payment drop down to $259 (saving you $56 every single month), but the total amount you pay back in interest would decrease as well.

And over the course of the loan, you would pay back just a little over $6000. Way less interest over the course of the loan.

Think about it. What could you do with an extra $56 per month or $6000?

I can think of a few things … treating myself to a nice meal once a month, invest it, or pay a little extra on the loan and get done earlier.

And that’s just hypothetical numbers. You can use the credible student loan calculator to find out your actual numbers.

Either way, consolidating your debt into a lower score helps you pay off your debt faster.

If you can benefit from a student loan consolidation, then give Credible a try. It’s like the kayak for student loans

And it’s super easy.

Here’s how it works.

You give Credible some basic information – your name, date of birth, where you went to school, salary information, how much you want to borrow/refinance and your monthly housing costs.

And then it does all the work for you.

It finds the lenders that are the best fit for your needs and presents the best offers for you to review that you are already pre-qualified for! Without harming your credit!

I’ve known folks that received a 15% interest rate at one company and found a 9% rate with Credible.

Crazy difference right?!

That freed up hundreds of dollars for the user that allowed them to boost their emergency fund, and help their parents while still paying down debt.

And they give you loads of options to choose from – 10-year loans, 5 years, 15 years – so you customize a plan for your needs.

You don’t have to languish under high-interest rates. Whatever your situation, just know that you have options.