Consolidating federal student loans good idea

This plan caps your payments at 20% of your discretionary income or the amount of your fixed monthly payments on a 12-year loan term, whichever is lower.When you first took out a federal student loan, you didn’t get to choose the loan servicer.If you consolidate with the federal government, your new interest rate will be the weighted average of your federal loans’ interest rates, rounded up to the next one-eighth of the percentage point.Private refinancing could lower your interest rate — and thus lower your payment or shorten your repayment term.The amount of time you have to pay back your federally consolidated loan will depend on how much you owe: When you refinance privately, you could have your pick of multiple loan terms, depending on the company.A longer repayment term means a lower monthly payment.

Federal loans often allow a host of deferment and forbearance options in case you lose your job or experience other financial hardships.

To do this, many or all of the products featured here are from our partners. But it isn’t the best choice for everyone, especially because it can’t be undone.

» MORE: How to consolidate and refinance your student loans Here are the pros and cons of consolidating student loans.

» MORE: How to switch your student loan servicer Consolidating your federal loans is a strategic move to help you manage your debt.

If your repayment term is extended, your monthly payment will be lower but you’ll pay more interest over time.

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