How to Consolidate Student Loans If you are a student with a high debt load, you may want to consolidate your debts, especially if you borrowed from more than one financial institution. Debt consolidation is beneficial in that it leads to a reduction of interest rates. This makes it easier to meet your monthly payments. If you are making multiple payments at variable interest rates, you will find consolidation beneficial. Then, securing a single loan with a fixed rate will help you pay it off, making it more affordable. Basically, debt consolidation refers to grouping multiple loans under one lender who buys them. Thus, this institution becomes the debtor’s primary lender. One benefit of this is that the borrower has one payment and contact point, paying lower monthly payments. This can be quite beneficial, so here is how to consolidate student loans. One option is to apply for a home equity loan, but this is possible only if you have equity in your house. The principal of this loan may be in the same amount, but the interest rate will be lower. If this is not an option, you may check whether your current lender offers student loan consolidation plans. You may consolidate your loans or get a refinance at a considerably lower interest rate. This option is a good one given that you are a client already. Your financial institution has a good idea of your payment record, and you know their policies. If your payment record is good, the consolidation program your lender has on offer may be among your best options. However, take into account any associated fees before you decide whether consolidation is the best option for you. In general, the terms of a consolidation loan will be determined by your credit score and sometimes – by that of your cosigner. Your chances of being approved for a consolidation loan with a low interest rate are considerably higher if your cosigner has an excellent credit score. What should you know before you opt for consolidation? You have to be current on all loans most of the time as to get approved. It will make it easier to qualify if you show a good payment record for a minimum of one year. You should also present your payment records and bank records for all student loans you are presently repaying. Check the average interest rates offered with student loan consolidation as well. This way, it will be easier to shop around for a good offer. There are some downsides as well. Although student consolidation programs will reduce your monthly payments, you will be left paying a couple of thousand dollars more in interest. This happens because you extend the life of your loan. For example, if you add 10 years to the term of your loan, you will reduce your monthly payments by more than one third. You will owe double this amount, paying it in interest, however. Opt for a longer term only if you really have to free up some money on a monthly basis. In addition, if your original loans come with benefits, you will lose them by consolidating. These include cancellation benefits, principal rebates, interest rate discounts, and more. These can lower the cost of repayment significantly. Finally, you may want to check with the financial aid department of your university or college to see if they may recommend you consolidation loans offered by particular lenders.