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I cannot speak for everyone, but my reason for consolidating was to get the monthly amount I had to shell out down. In my case, I went from 3 payments that totaled approximately $450 to 1 payment of $250.

I also got the benefit of an interest rate that is capped at 8.25%. The interest rate I was paying on my non consolidated loans ranged from 9-12%. Remember the interest rate is capped not set at 8.25%. In the Direct Loan program the interest rate is adjusted each year. My interest rate this year went down from about 7.85% to 7.15% and that is not including the .25% break for direct debiting my payment.

Bottom line if you want to reduce the payments consolidation is the way to go. Yes, in the long run it may cost you a little more, but in the long run you should be able to make more money and pay off your balance earlier than the 30 year window they give you. Don't forget if you can't pay it all off in 30 years they forgive the remainder.

Also, remeber that while Sallie Mae, Direct Loans, etc. may make money on consolidations they also make money by providing the inital loans. If they didn't they wouldn't do it.

EBinDC
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