Why is Now the Best Time to Consolidate?

Consolidation of your student loans makes sense for a number of reasons, but perhaps the most important question to be answered is why is now the best time to consolidate? It might actually have been last week, or last year, that was in fact the best time but in the absence of time travel that’s not an option available to anyone. The question thus becomes is the best time to consolidate now or at some point in the future? Well, that depends upon interest rates.

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Something to consider when asking “why is now the best time to consolidate?” is one wrinkle of what actually happens in a student loan consolidation. All of the outstanding loans are consolidated (thus the name, of course) and a new interest rate calculated based upon the weighted average of the current ones. But the crucial point is that the independent loans are based on adjustable rates and the new, single, one will be on a fixed rate.

So the answer to “why is now the best time to consolidate?” depends upon our views of future interest rates. It’s pretty much taken as a given that interest rates are likely to rise in the coming years, so swapping loans based on adjustable or floating interest rates for a single one based on a fixed rate sounds like a pretty good idea. So the answer to our question of “why is now the best time to consolidate?” becomes clear: because we think interest rates are headed upwards and we’d like to lock in the current low rates.