When a student gets all his or her loans under the same Social Security number, then the government will agree to consolidate those student loans. The student’s individual loans are paid off, giving the student one large loan.

Moreover, when the government takes steps to consolidate student loans, it also takes two other important steps: It extends the loan and it lowers the loan rate.

There is not set way by which a loan provider can bring down the rate on a consolidated loan. A reputable loan provider carefully examines all the possible ways that a student’s rate might be made lower.

The loan provider then establishes that low rate as the rate for a consolidated and extended loan.

The government’s willingness to both extend the loan and to lower the rate can save students considerable money. Although the payment schedule has been extended, the person with the consolidated loan can feel free to pay the loan off ahead of schedule.

In other words, there is no prepayment penalty levied on those who make an early pay-off after choosing to consolidate student loans.

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