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Stafford loans are part of the federal loan program - which by law allows you to pay them off early without penalty - even after you consolidate them.

Before you decide to pay them off early consider your other debts. For example, if you have credit card/car loan debt it probably has a much higher interest rate than your student loans. In that case, focus on paying those credit cards/car loan off first. Besides that, student loans look better on your credit score than other types of debt.

In fact, student loan consolidation can actually HELP your credit score.
By consolidating, borrowers not only reduce their long-term debt but also can help change their credit score for the better over time.

More Open Accounts = Lower Score: Over a borrower's life, he may have taken out up to eight separate loans to pay for school. Each of those loans has a different payback amount, interest rate, and payment terms. The more credit and loan accounts a person has open, the lower his overall credit score. With consolidation, older accounts will be merged into a single account, thereby lowering the amount of open credit lines on a credit report.

Lower Payments = Higher Score: When a credit report is evaluated, the total amount of a borrower's monthly minimum payments is taken into account. When you have multiple loans, each of the payments is part of a borrower's monthly payment obligation. Borrowers who consolidate have only one payment to make, which is typically lower than the minimum amounts of the separate loans.

Your Debt To Credit Ratio - It Matters: Credit bureaus typically determine if you're in debt by evaluating the amount of your available credit you actually use. If you have a total of $10,000 available on three credit lines and you owe $2,000, your score will be higher than if you have maxed out your one credit line with a $2,000 limit. If a borrower has multiple loans with a maximum used, it will reflect negatively on the person's credit score. So it is important to consolidate accounts in order to reduce the number of open accounts being used.

Consolidation can help most borrowers in many ways, but rates won't stay low forever. They are so low now; the only place for rates to go is up. If you are on your way out of school, you'll need to save every cent you can in this tough job market.

Take the time to call lenders such as Student Lending Works or Northstar who will employ lending counselors to help determine if consolidation is right for you. Borrowers have more than their long-term payments at stake, but also their credit health as well.