Why should you consolidate your loans?

Before we move to answer this question, let us have a brief look at what consolidation means and what are the essential steps to consolidation.

What is Consolidation?

Let us explain this process using 3 characters; Anne, Mary and Rachel. Anne is a student who is a borrower of a direct loan and few other educational loans. Mary is the lender of the federal agent who has lent money to Anne. Rachel represents the US Department of Education. Anne has $1000 as her total borrowed amount from Mary. This is the sum of all the loans that has been borrowed from Mary.

Under the consolidation process, Anne consolidates all her loans with Rachel. Rachel pays the loan amount to Mary and provides Anne with a new loan and a new interest rate. Anne does this through two main processes:
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