Is Loan Consolidation Smart?

Melissa asks if student loan consolidation is a smart thing to do. Dave explains how it works and why you would do it.

QUESTION: Melissa on Twitter asks if student loan consolidation is a smart thing to do. Dave explains how it works and why you would do it.

ANSWER: Rule number one about student loan consolidation is you get one time. You can only do it once, so you would do it in a time like this when interest rates are very low. It is the time to do it. The second thing about student loan consolidation is you would want to end up with a fixed interest rate only. Don’t let them peddle you into a variable rate. The third rule of student loan consolidation is that after you have a fixed rate and you’re only going to do it one time, make sure that it’s a cheaper rate than the aggregate of your overall rate. Just because you have one little student loan that’s 9% and a whole bunch of big ones at 4%, if you take out a 5%, the aggregate may be higher. The total may be higher. Make sure your overall rate is cheaper across the board knowing that you only get to do it one time and only do a fixed rate.