But making your student loan payments on time every month can strengthen your credit.You’re showing that you’re managing your debt correctly and are able to pay your loan as agreed.It also may lower your monthly payments by giving you as long as 30 years to repay.While consolidating federal student loans may give you a much-needed break on your monthly student loan payments, that lower monthly payment amount comes with a price.A Direct consolidation loan has a fixed interest rate.The loan rate you will pay is based on the weighted average of the interest rates on the federal loans that you consolidate, rounded up to the nearest one-eighth of 1%.Loans that are unsubsidized, with interest, can grow during a deferment. News, a deferment can improve your chances of being approved, since the lender sees you aren’t required to make payments toward your loans at that time.
There are no prepayment penalties with a Direct consolidation loan, so feel free to pay more when you have the extra cash — it’ll help you save on interest. According to the Education Department, federal loans eligible for a Direct consolidation loan include: Subsidized and unsubsidized Direct loans, subsidized and unsubsidized Stafford loans, Direct PLUS loans, PLUS loans from the Federal Family Education Loan (FFEL) Program, Supplemental Loans for Students (SLS), Perkins loans, Health Education Assistance Loans (HEAL), federal nursing loans and some existing consolidation loans.So keeping that big student loan balance around, especially with a lower income ratio, is going to hurt you.So even though it could lower your score initially, keep in mind that paying off a student loan earlier means you’ll pay less in interest overall. When you apply, you select a student loan servicer and a repayment plan (learn more about Any questions you have about your loan application should go to the student loan servicer you selected for your consolidation loan. You can apply electronically or get a paper application.