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Why to Never Consolidate Federal and Private School Loans Together

Before you consolidate your student loans, you should research your situation and be sure you know what consolidating them will do. For instance, while it’s usually a good idea to consolidate both your federal or government school loans and your private school loans, they should never be consolidated together into one loan. The reason for this is simple.Federal loans have many benefits when consolidated that you don’t get with a private loan. Consolidating them together causes your loans to become a single, private consolidated loan, forfeiting all the benefits of the federal loans.For example, when you consolidate federal loans you’re eligible for lower, fixed interest rates that are not always available with private loans. Consolidating the two together will prevent you from locking in your interest rate because you’ll lose the government guarantee that’s attached to all federal loans. Then your rates will be subject to change, and can potentially get much higher.Also, interest paid on consolidated federal loans is eligible for tax deductions. If you consolidate them with private loans you will no longer be able to claim your interest which could amount to hundreds of dollars in tax deductions every year. Overlooking this would be a costly mistake.To be sure you’re not making a mistake by consolidating your loans, take the time to research the facts and check with a few different lenders to see which is best for your student loan situation. Don’t pick one to consolidate with until you’re satisfied you’ll be taking full advantage of as many loan consolidation incentives as possible.If you can, try to get your fixed interest rate as low as they’ll go on the federal loan, and set up the payments so you are paying as much as you can afford each month. This way your loan will be paid off as soon as possible.Unfortunately you won’t have as much flexibility with your consolidated private loan. Which, of course, is why it’s recommended that you consolidate federal loans separately from your private loans.

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