Although no one really enjoys repaying their student loans, it can be even more of a hassle if you had to take out multiple loans, especially if they came from different sources.  Many students turn to loan consolidation to make repayment a little simpler.  Instead of dealing with a bunch of loans and different providers, you only make one payment to a single lender.

In the vast majority of cases, federal student loans can only be consolidated through federal loan consolidation.  If you took out private student loans – from a bank, credit union, or other non-government financial organization – those loans will need to be consolidated by a private lender.  Although consolidation can offer many benefits, it is important to pay close attention to the terms and agreements involved with consolidation to avoid getting scammed.  Here are three details to watch out for when you consolidate your student loans:

• Avoid “limited time” offers.  Because people are used to seeing advertisements for sales at retail stores, it might not initially seem weird for a lender to offer a special on student loans.  Even though lenders occasionally run promotions or “specials” for financial services, be wary if they seem more focused on the deadline than your loans.  A good lender will take time to explain terms to you and answer your questions, while a scam artist will try to draw your attention away from these details and encourage you to sign up as quickly as possible.
  • If you have federal student loans, you should be especially cautious of these types of scams – the government regulates the already-fixed interest rates on federal student loans, and they offer their own consolidation program.  Most private lenders will not consolidate your federal student loans, so companies who claim to consolidate private and federal loans together should be examined carefully.  Even if someone offers to do so, you will probably be subject to higher interest rates.

• Don’t pay money to receive discounts.  Scam artists use this tactic with hundreds of services and products, including student loans.  In most cases, you should not need to pay fees to enter a loan agreement or get discounts.  With federal student loans, there are no origination charges, and any fees incurred through your lender are taken out at disbursement; you should not be billed for these fees.  Policies for disbursement and other fees vary greatly between private student loans, but in general, your fees should not be higher than 5% of the amount you borrowed.  Make sure you read all the conditions of your loan terms (even the small print) and ask you lender to clarify anything you don’t understand.  Again, a legitimate lender will answer your questions and will not rush you into an agreement.
• Beware of ultra-low interest rates.  Sometimes, fraudulent companies will lure you in with the promise of a low interest rate with no credit check.  Unfortunately, if your loan terms seem too good to be true, they probably are.  A lender might promise you a 1% interest rate but it is most likely a variable rate, meaning it can go up.  Your loan might only accumulate 1% interest for a month or two, and then suddenly be subject to 10% interest.  The gap between 1% and 10% might look small, but it can add up to hundreds of dollars over the course of repayment.  Carefully review all conditions of the loan and have your lender explain any vague language.