If you find it difficult to monitor and pay the student loans on your own, and want to reduce your monthly payment and lengthen the repayment schedule, loan consolidation may be for you. How can borrowers determine if consolidating federal loans is the best option for them?

For instance, Sam has finished college last year and incurred eight different loans with eight different lenders.

Consolidating your federal loans depends on various factors, including your current financial situation and the number of loans a person has with multiple lenders. Citing the example above, Sam has two options: track multiple lenders and pay all of the loans on her own, or contact her lenders and/or the federal government’s direct loans program to combine these into one. She chose the second option.

How does loan consolidation work?

Loan consolidation enables a borrower to combine one or more federal loans into one loan in order to centralize loans into one bill, lower monthly payment, and extend the repayment period between 10 and 30 years. A person may begin consolidating your loans after his or her graduation, leaving school, or dropping below half-time retirement.

Consolidation won’t stop a borrower from paying off his or her loan early, as well as advance his or her payment. You may repay your loan early without incurring any penalty. Aside from that, you can access alternative repayment plans and change variable interest rate loans to a fixed interest rate.

Most federal loans are eligible for consolidation, including the following: direct subsidized loans, direct unsubsidized loans, subsidized federal stafford loans, unsubsidized federal stafford loans, direct PLUS loans, PLUS loans from the Federal Family Education Loan (FFEL) Program, Federal Perkins Loans, Federal Nursing Loans, Supplemental Loans for Students (SLS), Health Education Assistance Loans, and certain existing consolidation loans.

The first step to loan consolidation is checking the National Student Loan Data System for Student. Using their database, you can use the electronic personal identification number you obtained when you applied for loans to access all your federal loans. If you can no longer remember your pin, you may check the Federal Student Aid PIN website to request for a duplicate pin.

Loan consolidation has fixed rates that is based on the weighted average of all the loans being consolidated. Federal loan rates are set out annually. Hence, you may have several interest rates for loans taken out in various academic years. You may have noticed some student loans carry variable rates. That is because federal student loans had variable interest rates before July 1, 2006. Therefore, if you obtained a loan before July 1, 2006, the rate changes when the new rate for federal loans is revealed yearly in July.

Upon consolidating loans, you will have subsidized and unsubsidized loans, which will remain in such forms in the event you return to college at a later date or qualify for a deferment where you won’t incur interest on subsidized loans.

Just a caution: even after consolidation, some loans may not be included and will go into default should you fail to give your payments. Go to the database to know all your loans prior to the consolidation. You may consolidate again if any loan is missing from the previous consolidated loan.