A 6-Step Guide to Managing Your Student Loans

I know many of you are suffocating under a mountain of student loan debt. Approximately 43 million borrowers, or seven in 10 U.S. graduates, are carrying over $1.25 trillion in student loans. The average debt is at an all-time high, $37,000 per graduate.

No matter if you can afford your student loan payments or are struggling to make them, it’s important to know your options. Many graduates have multiple loans from a variety of lenders. So, get familiar with what you owe and who you owe it to. If you’re not sure, visit your lenders’ websites or review free copies of your credit reports at CreditKarma.com or AnnualCreditReport.com. Having all your loan accounts and their interest rates and terms listed in one place allows you to see the big picture of your finances and know what to prioritize.

If you have more than one federal student loan, the government can consolidate or combine them into one loan with an interest rate that’s a weighted average of all of your rates. A consolidation doesn’t reduce the interest rate, but it does give you these benefits:

• Fewer accounts and payments to keep track of each month 
• Any older, variable-rate loans are converted into one fixed-rate loan (since 2006 they are all fixed) 
• No or minimal fees 
• Lower monthly payments, if the length of your payment term is extended

Both students and parents can consolidate education loans; however, you can’t combine loans that are in different names. Only loans from the same borrower can be consolidated—even married couples must keep their respective education loans separate. There are usually minimal fees to do a student loan consolidation, and you can work with any lender you choose.

The major downside to consolidating federal student loans is that you may lose special features or benefits that come with your original loans, such as forgiveness for public service work, forbearance for financial hardship, repayment options, and certain interest rate discounts and rebates. So, always ask potential lenders what loan options you’d give up in a consolidation.

Use the Loan Consolidation Calculator at FinAid.org to compare the monthly savings to the increase in total interest expense over the life of the loan. Carefully analyze the cost of repaying your original loans against the cost of paying for a consolidated loan.

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