Since tuition costs are going up all over the country, more and more college students are taking out loans to pay for their degrees. But it can be hard for students to pay back their student loans, especially since their incomes right after graduation are often a lot lower than what they could earn in the long run. Student Loan Consolidation is a good choice for many recent college graduates because of these things.
How the consolidation of student loans works
Like most other consolidation programmes, student loan consolidation works. The different loans you have, like Stafford, Perkins, HEAL, NSL, and private loans, are taken on by a single lender. Even though the terms and conditions of each loan are different, a loan consolidation company will pay off all of your loans and give you a single, usually longer-term loan. This means that you no longer have to pay off one loan in three years, another in five, and another in ten, or have one loan's interest rate be fixed and another's be variable. Instead, all of your loans are put under a single system. Then, you can talk to your loan consolidation lender about how the loan will work. Most students choose to pay back their loans over 10 to 30 years. Obviously, the longer the loan term, the less you will have to pay each month.
Why Should I Combine?
When you consolidate your student loans, you can make your payments over a longer period of time so you can use your future income. Students have a good reason to think that as their careers go on, they will make more money. By extending the length of their loan payments, they won't have to pay the most on their loan when their income is at its lowest. Another good thing about student loan consolidation programmes is that they make paying back student loans easier and less confusing. For recent college graduates who have loans from both public and private lenders, it can be a bit of a pain to keep track of the different terms and conditions of each loan. Because of these things, consolidation is a very common choice. But that doesn't mean it doesn't have any downsides.
Why Should You Not Combine?
Lenders like loan consolidation of any kind because they can charge fairly high "consolidation" fees. Even though student loan consolidation is better regulated than most other types of loans, the fees that loan consolidation companies charge still add quite a bit to the amount you have to pay back. One way to avoid this is to ask to pay ALL consolidation fees up front. By doing this, you can make sure that you will at least be told how much you are being charged. Another problem with loan consolidation is that if you extend the length of your loans (say, from 5 to 15 years), you'll pay a lot more in interest. Your interest payments on your loans accumulate over time. This means that the interest on your loan will go up the longer it takes you to pay it back. Many students don't notice this because they only look at the interest rate and not the total amount of interest that will be paid over the life of the loan.
Student loan consolidation is a useful tool for students who want to put off paying back their loans until they make more money or who don't want to deal with all of their separate loans. Recent graduates should keep in mind, however, that these benefits do not come without drawbacks, despite what lenders may tell them. By knowing both the pros and cons of consolidating your student loans, you can make a more informed decision about whether or not it is the best option for you.
