Student Loan Consolidation

So I got a letter in the mail from a student loan consolidation company, saying I could set a fixed rate of roughly 6% for my student loans. Although this is (they claim) the lowest rate in history, I can’t help but wonder whether there’s a catch. For example, could I end up stuck at 6% while the non-fixed rate drops lower?

So, is this kind of loan consolidation a good idea, or is there a hidden catch?


Are these federal loans? If so, you can consolidate through the Department of Education. I’ve done this–you can do the whole thing online on their website. Very convenient.

read the fine print! If it’s fixed at 6% and interest rates keep dropping, you should be able to consolidate again to take advantage of lower rates.

but read the fine print!

I’ll second China Guy’s advice. Looking over the fine print of the letter I got, it stated that after 48 on time payments, then they would lower the interest. That’s 4 frickin’ years. Plenty of time to screw you over. The current interest on my wife’s student loans is already 5.99% so it didn’t seem worth it.

Take care,


Don’t forget that when you reamortorize a loan, despite lower interest APR, you could end up paying more in the long run.

Look at the amortorization schedules for your existing loans, and see where you fall. It may be cheaper in the long-run to NOT consolidate.

Thanks guys! The company said I had to consolidate by such-and-such deadline. From what you guys say, it sounds like I can do the same through the Dept of Education, without the deadline, and still get the fixed rate.


You often lose benefits if you consolidate through a private consolidator, too. Like the tax deduction for student loan interest, the cancellation on death or disability, partial cancellation for certain forms of employment, and the generous deferment and forbearance policies of your original student loans. I have almost $90,000 in student loan debt which I am not consolidating because consolidation would not help: almost all of that debt is in Direct Student Loans which are already effectively “consolidated”.