Student Loan Debt Consolidation Myths

Introduction

Myth #1: Consolidating your student loans is the same as refinancing.

Myth #2: You can consolidate both federal and private loans.

Myth #3: Consolidating your private and federal loans will affect their interest rates differently.

Myth #4: Consolidating loans doesn’t affect your payment terms or interest rates.

Myth #5: You can only get a consolidation loan from the government.

Takeaway: The government doesn’t offer student loan consolidation, you can’t change repayment dates when you consolidate, and more — so be careful before consolidating!

Myth #1: The government consolidates student loans.

• Myth #1: The government consolidates student loans.
• Myth #2: You can consolidate your student loans for free.
• Myth #3: Consolidating a private loan into a federal Direct Consolidation Loan will lower your monthly payments and interest rate.

Myth #2: Getting a private student loan consolidation is the same as getting a federal student loan consolidation.

There are many myths surrounding student loan debt consolidation, with the most common being that you can consolidate both federal and private loans into one convenient payment. This is simply not true. While it’s true that the federal government does offer a program for consolidating all of your federal student loans into one convenient payment, this doesn’t include private student loans; they’re ineligible for consolidation under any circumstances.

This can be confusing to some people because they may have heard about “private student loan consolidation” or “consolidation” in general and assumed that their private loans were eligible for such things—but since private lenders don’t participate in this program (and neither does the federal agency), it just isn’t possible to combine your private and public debts in this fashion.

Myth #3: Consolidating your loans increases your debt.

Myth #3: Consolidating your loans increases your debt.

The Truth: This is a myth because consolidating your student loans actually reduces the amount of interest you pay on them by lowering the interest rate on all of your loans to the weighted average of the new loan (which is determined by how much debt you have). It also lowers monthly payments and helps manage balances better.

Myth #4: You should consolidate your student loans as soon as possible.

You should consolidate your student loans as soon as possible.

While this advice is true for some borrowers, it’s not always the case. If you have a lot of debt, consolidating can make sense so that you can take advantage of lower rates and more favorable terms. On the other hand, if you have a lot of loans (and therefore different terms), consolidating may not be in your best interest because it could complicate repayment options and result in an increase in monthly payments or overall cost.

It’s important to think carefully before making any big decisions related to your student loan debt—especially if they involve putting those loans into one big pile that would be difficult to manage individually!

Myth #5: When you consolidate your loans you can change the repayment date.

You can change your repayment date after consolidation. You can also change the repayment term to a longer or shorter period, depending on what works best for you. The only difference between before and after consolidation is that changing your repayment term after consolidation may affect how much interest you pay on your loan balance.

If you consolidate before changing the repayment date, it will stay fixed until that time passes and then reset to whatever was previously agreed upon by both parties (usually 10 years). If you do decide to change it before then and want to keep paying off your loans over a longer period of time than what’s currently agreed upon by both parties, this could result in lower payments each month—but more interest paid overall over time because there’s more debt remaining on their end until it’s paid off entirely plus additional principal accrued each month due to inflation which would have been offset if their loan had been structured differently in 2018 rather than 2022 when inflation wasn’t as high as now; however, since money doesn’t exist only credit cards do right now so maybe we should start working towards getting rid of cash altogether?

Myth #6: You can consolidate your private student loans with federal loans.

If you have both federal and private student loans, consolidating your federal loans with private loans is possible. However, if you want to consolidate all of your loans into one single loan, including the private ones, then this isn’t an option.

In short: You can consolidate federal student loans with other federal student loans, and you can consolidate federal student loans with private student loans (and vice versa).

Myth #7: It’s best to wait until you graduate to consolidate your student loans.

Myth #7: It’s best to wait until you graduate to consolidate your student loans.

FALSE! This option is available for anyone who has federal student loan debt, so there’s no reason to wait. The sooner you consolidate, the sooner you can start saving money on interest by locking in a lower rate and paying off your loans faster. In fact, some borrowers choose to do just that—consolidate while they’re still in school so that when they graduate with a big pile of debt and limited income options, they won’t have any trouble making their monthly payments or repaying them as quickly as possible. If anything, consolidating while still in school allows borrowers more flexibility—they don’t have to worry about finding extra money every month or taking on additional jobs just to pay off their loans before interest builds up too much (as opposed to waiting until after graduation).

Myth #8: Consolidating your federal and private student loans will affect their interest rate differently.

Myth #8: Consolidating your federal and private student loans will affect their interest rate differently.

Whereas your federal loans (student loans made by the government) have fixed rates, private student loan providers can change their rates at any time. What this means is that if you consolidate with a lender who changes the terms of your private loan, then those changes will be applied retroactively to the date of consolidation. Therefore, if you consolidate your federal and private loans into one new loan, but then later decide to transfer some or all of those funds from your original lender to another lender that charges higher interest rates, you’ll end up paying more than if you hadn’t consolidated in the first place!

Myth #9 Consolidation doesn’t affect interest rates or terms of repayment.

Myth #9

Consolidation doesn’t affect interest rates or terms of repayment.

There are many different factors that go into determining how much you pay on your student loans, including your annual income, whether your loans are subsidized or unsubsidized (how much they’ve accrued in interest), and whether they’re federal or private. What’s more, if you choose to consolidate all of your federal student loans into a Direct Consolidation Loan but continue making payments on one or more existing federal student loans in addition to the new consolidated loan(s), those payments will count toward the 120 required monthly payments needed for Public Service Loan Forgiveness (PSLF). You may also have options when it comes to interest rate and repayment term length. Let’s take a look at some examples:

• The interest rate is 5% over 10 years with an option for variable payment amounts based on income after graduation. This means that if you make higher payments now—when it’s cheaper—you’ll pay less overall over time because those extra dollars will go toward paying down principal instead of just accruing additional interest charges (which reduce your overall balance).
• The interest rate is 6% over 20 years with fixed monthly payments of $300 per month until each loan has been paid off completely.

Not all of these myths are true, so pay attention to them before deciding whether to consolidate your student loans or not

While it’s important to ensure you have a good understanding of how student loan debt consolidation works before deciding whether or not to consolidate, there are also some myths that can influence your decision.

Not all of these myths are true, so pay attention to them before deciding whether or not to consolidate your student loans:

• Myth #1: Consolidating will lower my monthly payments.

This is wrong. While it may seem like consolidating will bring down your overall total debt amount, the truth is that consolidating doesn’t change the actual interest rate on your loans (but see myth #2). Your monthly payments will likely decrease because they’ll be spread out over a longer period of time, but don’t count on this as being anything more than a minor change in what you’d pay each month—if anything at all!

• Myth #2: Consolidating will lower my interest rates by refinancing my loans with another lender who has better terms than my current lender(s).

This isn’t true either! If you’re refinancing with another lender who has better terms than where you’re currently at now, then yes—you’ll probably get an improved interest rate (and thus save money) when making payments later down the line if those terms are better than what’s currently available through existing lenders and/or services; otherwise, new terms won’t necessarily mean lower rates since they’re still going through same company/servicer anyway.”

Conclusion

While there are many myths about loan consolidation, the fact is that it can be a great way to get a handle on your debt. Consolidation lets you combine various private and federal loans into one larger loan with one monthly payment, which might be more manageable for you if you currently have multiple loans with different interest rates or payment due dates. However, we do not recommend consolidation for everyone; it is only ideal for those who feel overwhelmed by their current repayment plan and want an easier option.