Consolidating student loans means combining multiple federal education loans into a new Direct Consolidation Loan or trading in multiple federal or private loans for one new private loan. The main purpose of consolidation is to simplify loan repayment by giving you a single loan with one monthly payment. Here are some key points to know about consolidating student loans:

Pros:

• You may be able to lower your monthly payment by extending your loan term.
• You can simplify your loan repayment by having only one monthly payment.
• You may be able to switch from a variable interest rate to a fixed interest rate.

Cons:

• Consolidation may not lower your interest rate.
• Consolidation can cost you more over the life of your loan if you have unpaid interest that capitalizes.
• You may lose credit for your payments toward income-driven repayment (IDR) forgiveness.
• Consolidation may not be the right choice for all borrowers.

When you consolidate your loans, any unpaid interest capitalizes, meaning your unpaid interest is added to your principal balance, and the combined amount will be your new loan’s principal balance. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25% . Debtors can choose terms of 10–30 years, and although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. Keep in mind that once your loans are combined into a Direct Consolidation Loan, you can’t undo this consolidation.