Chances are, if you took out student loans to pay for your education, you have been getting calls and mail offers to consolidate your student loans, or you will soon. There are a lot of reasons why you might want to consolidate your student loans. You can get a fixed interest rate, and you might also be able to lower your monthly payments. If you start having trouble paying your bills, you may also be able to use flexible payment options with a consolidated student loan.
Student loan consolidation is different from other types of debt consolidation programmes because it lets you put all of your loans into one package with better terms. You also don't have to worry about being turned down because of a low credit score, and the interest on the loan may be tax-deductible. Also, if you die, your debt will be forgiven, so your family won't have to worry about paying it back.
If you have a student loan with a variable interest rate, consolidating it can also help you lock in a lower rate before it goes up the following year. This one step can actually help you save a lot of money over the life of the loan.
Of course, along with the pros, there are also some cons that you should be aware of. One of the most important is that if you lower your monthly payment, you're actually making the loan last longer, which means you'll pay more in interest over the life of the loan. You can still get the other benefits of a student loan consolidation, though, even if you don't want to deal with this one. Just don't reduce your payments unless you have to.
When looking for a lender to help you consolidate your student loans, you should always compare the terms of each offer. Think about the interest rate and how long you have to pay back the loan to make sure you are getting the best deal.
If you have both federal and private student loans, you should also know that while both types of loans can be consolidated, it might not be a good idea to combine your federal and private loans into one package. Private loans have rules that don't apply to federal student loans, such as no deferments, no interest tax deductions, no debt forgiveness in case of death, and no loan forgiveness for working in certain fields. If you have both private and federal loans, it is usually best to consolidate the private loans separately from the federal loans so you can keep the benefits of the federal loans.
If you know everything there is to know about consolidating your student loans, you will be able to make a better financial decision.
