Student Loan Consolidations: When They should be Avoided

Heather Jarvis provides an enlightening video discussion on why advisors should be cautious about recommendation student loan consolidations.

Consolidation should be done only when there is a very good reason and you only get one shot so Heather recommends you keep you options open until you have a specific reason such as when positioning for Public Service Loan Forgiveness.

When Not to Consolidate


Key Points

The professional advisor should evaluate the borrower's circumstances before executing a consolidation loan. Here are some considerations that may or may not apply to their situation.

  • Consolidations can eliminate some key benefits such as interest rate reductions that borrowers of FFEL loans may have gained. 
  • Consolidations may trigger capitalization of unpaid interest, raising the total balance due.
  • Be cautious of consolidations if you have ParentPlus loans. 
  • Make sure a borrower can truly benefit from a consolidation such as when they are positioning for Public Service Loan Forgiveness.
  • Consolidations should be use only for a specific purchase and well thought out before moving forward. 
  • Consumers can consolidate online at no charge. 
  • If consumers want to find third party help for questions about consolidation or any other matter related to their student loans, proceed with caution. To download a document on how to evaluate a financial professional to work with student loan matters, click here.

The CSLP Program contains extensive information on student loan consolidations. 

To get all the details and help with your student loan clients:

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Written by csla_contributor

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