Making the move to consolidate your student loan debt can reduce your payments and free up cash.
For those that have student loans like a Stafford or Perkins Loan, a student loan consolidation program may offer you several benefits. This type of consolidation loan works much like other consolidation programs. The loan, or loans, is paid off in it’s entirety by a new loan with new interest rates and terms.
Today, there are many college graduates who do not get jobs right out of college and their new life after college can be particularly difficult. A lot of college students live on credit cards during and after college and as a result develop a high debt load and have less free cash to pay down student loans.
Many may not be able to make payments and will fall behind on their student loans. It’s a perfect time to look at their options and consider getting rid of high interest rates and high monthly payments. These are all reasons to consider a student loan consolidation program.
Benefits of Consolidating
All federal student loans are guaranteed by the federal government. This means that they are slightly different from other loans that are out there, in that the issuers are guaranteed repayment of the loan by the government. The loans that go through consolidation will do so with a loan consolidation company or they may be consolidated through the US Department of Education.
There are many benefits to getting these loans, but the two most important are these:
- By using student loan consolidation, you can get a lower interest rate on the loan that you currently have. Now, in most cases, you will only be able to get this benefit one time. Once you consolidate your student loans, you can consolidate again, but your rate will not change from the first consolidation.
- By using a federal student loan consolidation, you will be able to extend the period of time that you will hold the loan. This will lower your monthly payment amounts considerably.
Drawbacks of Consolidating Student Loans
There are also some disadvantages of the student loan consolidation. The most important of them is the fact that if you do consolidate your student loan, you are going to extend the time period in which you will be paying it off.
While this will help you to lower your monthly payment, but you will also be paying more with the student loan consolidation in interest over the long haul. So, it is a more costly option than paying off your student loans without consolidating.
Student Loan Programs
Student loan consolidation programs will offer you several benefits, one of which are student loan rates that are being offered for the current year. Loan programs such as Stafford, PLUS loans and Sallie Mae student loan programs can all be consolidated.
If you have a US Dept of Education student loan, you may need to refinance it with the US Dept of Education. You can use a federal student loan consolidation just two times. You can do this once with the Dept of Education and once with a private lender.
Do I Qualify to Consolidate My Student Loans?
Virtually anyone that has college student loans qualifies for a student loan consolidation. As long as you can apply for and get the loan (there may be loan minimums needed), you should consider it especially if the interest rates of your current college student loan are higher than the current market student loan rates.
A company like SimpleTuition will be able to help you consolidate your student loan debt.
Remember, the interest paid on a student loan is tax deductible.