Student Debt CenterIs it Wise to Consolidate Student Loans!

Students busy with settling their careers post completion of their courses should give first priority to the work engagements. All personal and financial commitments are shifted to the second place in their agenda at that point of time. In such a situation if they are forced to think of the multiple loans they have accrued to complete the course of their dream, this would only add to the stress levels of the student who is in anyways under huge stress due to the competitive professional world. Also, at times the students completely forget about their multiple loan schedules and often end up defaulting on their loans.

In order to avoid such a situation, the students have an option of consolidating their loans or converting multiple loans into one loan. Though this is easier said than done, but this would not only reduce confusion and ambiguity regarding multiple loans but also make repayment efficient and timely. But before taking a decision regarding consolidation, they should know all about their loans and the advantages and disadvantages of consolidation.

Complete Knowledge about Loans

The students should know the types of loans taken which implies that they should be clear whether the loan taken is from the Federal Government or the Private Lender. They should also know about the interest rates at which the loans have been taken since different interest rates exist at different times. They should be aware of the interest type – Fixed or Floating. Most importantly they should have a complete grasp of the benefits, such as forgiveness benefit, income related repayment benefit and other such benefits, of each loan they have accrued.

Advantages of Consolidation

The most important advantage of a consolidated loan is a single, convenient monthly payment. Also, most of the times, a consolidation loan might provide a different repayment plan than the existing loan. Such a repayment plan can reduce the payment burden for the student at least in the short term because generally the term of such repayments increases than the actual loan repayment tenure. If chosen wisely, the consolidated loan can have reduced rate of interest rate. The student should choose a fixed interest rate for such consolidated loan and this rate would be a weighted average of interest rates of the multiple loans a student has accrued rounded off to one eighth of a percent. The fixed rate of the consolidated loan would ensure a certain payment each month thus reducing the uncertainty of payment of multiple loans with variable interest rates.

Disadvantages of Consolidation

Consolidation of multiple loans needs to be done intelligently. Incase if high interest rate loans are clubbed with low interest rate on, the borrower would have to shell out a higher average rate of loan which is not favorable. If the consolidation of loans is done at a time when the interest rates are forecasted to fall down in the near future, the borrower should consolidate intelligently to take that benefit because once the consolidation is done, nothing much can be done about the loans. Loans offering certain benefits such as income related repayment or forgiveness, if consolidated with those which does not have such benefits, the borrower would nullify the benefits due to consolidation. Also, a longer repayment schedule indicates an excess payment in the longer run because of the extra interest that you need to pay for the extra period of withholding the money.

Thus consolidation should be an option only for those borrowers who wisely have a benefit in consolidating. Alternatively, those borrowers who have a risk of defaulting or not managing their loans better should opt for consolidation of loans.

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Student Debt Center18459 Pines Boulevard, Suite 532

Pembroke Pines, FL 33029

Call: 800-551-7187Fax: (866)746-1986

Email: info@studentdebtcenter.orgVisit: http://studentdebtcenter.org