Benefit of consolidating student loans
A consolidation loan is just what it sounds like: You can take two or more outstanding loans and refinance them into one.
But if interest rates are low you can lock in long-term savings, since less of your money will go to interest.
You can get a consolidation loan from any private lending institution with government approval, or from the Department of Education itself. Some offer favorable terms like interest-rate reduction for making on-time payments or choosing automatic withdrawal; others may offer repayment plans that better suit your financial situation.
Fin maintains a list of student loan institutions, including large banks; private companies like Sallie Mae; and state education system lenders like the Missouri Higher Education Loan Authority and the Utah Higher Education Assistance Authority.
The interest rate on your consolidation loans is the weighted average of the interest rates on the loans you have now, rounded up to the nearest 1/8 of a percent and capped at 8.25 percent. You can get help doing the math with an online calculator at the Federal Direct Consolidation Loans website.
Click on “Borrower Services,” then “Online Calculator.” Interest rates are determined by the federal government and change each year on July 1, so check with a lender to get their take on possible rate fluctuation.
The downside is that your grace period will end once your consolidation loan goes through.