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Here’s what you need to know before deciding to consolidate student loans.Loan consolidation is when a borrower takes out a new loan to pay off several smaller student loans.Consolidating private loans works in a similar fashion, as far as paperwork goes.The difference is you’ll need to apply through a private lender.While loan consolidation can sometimes dramatically lower a borrower’s monthly payments, Kevin Walker, co-founder of the college finance site Simple, says it can also cost you.“The downside of getting a lower monthly payment is that you’re going to subject yourself to substantially more interest charges over the life of the loan,” he says.It also means if you’re a new grad with little credit history, you might need a co-signer to be eligible.

Regardless of whether consolidating federal or private loans, there is a catch.Know that you might need a higher credit score if you want the best rates without a co-signer.Federal consolidation loans come with borrower protections private lenders may not offer.When it comes to consolidation, the types of loans you have matters, but most federal loans, including Stafford, Perkins, Direct Plus and Supplemental loans, can be consolidated with other federal student loans.“The interest rate on (federal) consolidation loans is an average of the interest rates on the (federal) loans you’re consolidating,” says Ken O’Connor, director of student advocacy for Fynanz, a New York City firm providing technology for the private student loan market.

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