Explaining How Student Loan Consolidation Works in Simple Terms
Consolidating your student loans can have some real benefits. But in order to decide if it is the right decision for you, let’s take a look at what consolidating student loans is, what it isn’t, and what it can do for you.
Is student loan consolidation different from other debt consolidation?
The short answer is, yes it is. It does share some similarities with other forms of debt consolidation. For instance, consolidating any debt, student loans or otherwise, enables you to have only one monthly payment and pay one interest rate instead of having multiple monthly payments and paying various interest rates. This can help simplify your life and if you consolidate into a loan that has a low interest rate, it can help you save money.
What About Consolidating Federal Student Loans?
One difference you will find with consolidating student loans is that federal student loans cannot be consolidated with other types of debts like consumer debt. But if you have private student loans, it is possible to combine them with other debt into one low-interest monthly payment.
Check out this article for reviews of student loan consolidation companies.
If you have federal student loans and you want to consolidate them, it can be beneficial to go with a Federal Direct Loan Consolidation. You still get the benefits you would receive by consolidating through a private company (one monthly payment and usually a lower interest rate), but choosing a Federal Direct Loan consolidation keeps you eligible for the benefits provided through a federal student loan such as having your loan forgiven if you work in public service or taking advantage of the federal government’s alternate repayment plans.
Is loan consolidation a good idea?
It can be a very good idea, but it depends on your circumstances. College costs have increased dramatically and students are graduating with high amounts of debt, often owed to multiple lenders and with interest rates that are high or, even worse, variable. Consolidating your student loans can enable you to find a lower interest rate that will save you money as well as help you pay off the loans faster, not to mention, the payment can be more manageable. There are a few things to keep in mind, if you decide to consolidate your student loans.
• A fixed interest rate is always best. If your consolidated loan has a variable rate, it can cause you hardships later on. This site will let you review student loan consolidation companies. It includes reviews of the companies and their interest rates.http://www.degreesource.com/student-loans-consolidation-explained/
• Often, a consolidated loan will increase the number of years that you are carrying the debt. Even if the interest rate is lower, you can wind up paying more in the long run because you have extended the life of the loan. If you can’t make your loan payments as they are set up now, then paying this additional amount in interest can make sense. If you can make your payments currently, then take a look at your budget and your goals for the next several years to decide if consolidating your student loans makes sense for you.
• When you consolidate your student loans, you have to think of it as a brand new loan. The terms, conditions, and interest rates of the old loans will no longer apply. You will be subject only to the rules, terms and conditions, and interest rates of the consolidated loan.