To figure out if consolidation will mean losing lucrative benefits, Kantrowitz recommends that students considering consolidation ask their lenders about benefit loss before combining loans.
Stay in contactOn top of consolidation woes, a change in loan servicers could also affect where and when students should send in payments.
"The biggest thing borrowers need to know if their loan is sold is that they may need to send payments to a different address and to notify the new servicer if they move," says Nelson. "One of the easiest ways that students end up in default is that the mail never gets to them because the student never tells them where they're moving. If a borrower wants to be proactive, stay on top of that issue."
Sending payments to a different address is no big deal for borrowers whose loans were all bought by the Department of Education. However, borrowers who hold multiple loans, some dating prior to 2007, may find that some of their loans have been bought under ECASLA and others haven't. In that case, students may need to send payments to two different loan-servicing agencies.
To ensure that they're on top of payments, students should contact their lenders as soon as possible to verify where to send payments and to which servicers, especially if multiple lenders are involved, says Frank Gittens, CEO and co-founder of Advance Your Institution, a Goodyear, Ariz., company that provides liquidity for school-sponsored student loans.
"If I have a Bank of America loan from last year and a Citibank from this year and both entities are selling to the Department (of Education), I would call and ask, 'How is that going to get reconciled when it comes to paying back my loans?'" says Gittens. "Are they going to combine payments? If not, I'd think about consolidating those loans. When you graduate, you're not going to want several different bills to pay."
Students can bypass the change-of-address problem and save a little on interest by enrolling in an automatic payment system that directly withdraws from a bank account each month. Students and parents can also pay loans online at www.dl.ed.gov.