To Consolidate Or Not To Consolidate, That Is The Question

We get a lot of questions about the who, what, when, where, why and how of paying off student loans.

Oftentimes, the “secret” is to pay as much money as you can, as quickly as you can.

No matter where you are on your student loan journey, at some point, or semi-regularly, you will be faced with the opportunity to consolidate your loans.

You will get offers galore. Companies will be coming at you from the left and the right, to swoop in and save you—they’ll take your student loan pain and wrap it up into one nice, convenient, monthly payment.

Before you get too excited, you’ve got to ease into this with your eyes wide open.

Simplification Is Good

Consolidating your student loans will help you simplify. One payment instead of three or four or however many you’re currently juggling. So just one payment is easy. Simple is sustainable, so we always opt for simple when it makes sense.

Positive Cash Flow Is Positive

Consolidating will also improve your cash flow. However, if it seems too good to be true, it probably is. The way that these companies are able to lower your monthly payment, is by pushing out your pay-off date. You may be paying less every month, but ultimately, you will pay more, for a longer period of time.

More Interest, For An Extended Time Period, Is Not

So when someone says, “Hey, we’ll free up your cash flow; we can lower your payment and you’ll have improved cash flow,” improved cash flow is a huge plus. But if you aren’t following a budget, if you aren’t committed to funding your priorities, and you just blow that new margin? Well, that is not a huge plus.

That’s where things can get tricky, where you might have a false sense of security about your progress. But you aren’t actually making progress; you’re just shifting things around and calling it progress.

It is the same amount of debt, likely more with interest, you are just spreading it out, allowing it to control you for a longer period of time.

Borrower Beware

If you’ve been budgeting for a while, and all of your money is doing what it’s supposed to be doing; If you’re being wise, smart, and really honest with yourself and you’re really going after your debt, then consolidating a student loan down to one payment—getting even more aggressive with that extra cash flow, to do whatever you need to do to be done with your debt once and for all—can be a great thing.

But if for any moment you think you might free up that cash and not worry so much about your spending habits or your priorities, then consolidation is probably going to end up feeling like a trap.


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