Just like with any financial solution, when you consolidate college loans, you get both its benefits and disadvantages. Right after graduation, it is advisable to take serious steps and to consider how you can best repay your student loans. By consolidating your student loans, you combine multiple loans into one. How Student Loan Consolidation Works It's actually very easy and simple. When you borrow a number of student loans from different lenders when you're in school, you might have a hard time keeping up with all the payments.
By consolidating loans, all your student loans are combined into one new loan from one lender, at a lower interest rate, and even longer time to repay. Although this might sound enticing, it is best if you consider the benefits as well as the drawbacks so you can make a good decision. Consolidation During Grace Period There are two sides to this issue. The good thing about this is that you can receiver a lower consolidation loan interest rate if you consolidate variable-rate Stafford loans during your grace period (six months after you leave school before you start making payments). However, the bad side is that when you start consolidating your loans during grace period, you forfeit the remaining grace period and have to begin making payments on your consolidation loan within 60 days.
To solve this, you can consolidate your loans during the later part of your grace period. Repayment Period Extension Based on your total education loan debt, repayment period can be extended up to 30 years. This means that your monthly payments will dramatically decrease. If you're having a hard time coming up with the monthly payments, then this will be good for you. However, by stretching your debt over a longer time, you will be paying more interest over the life of your loan.
In the end, you'll be paying more for your loan in the long run. That's why it is better if you settle your accounts with the shortest repayment period possible that you can afford. And, there's no penalty for prepayment so you can pay even before the payment is due. One Payment From One Lender On the good side, consolidation will really simplify your life. You only have to deal with payments to one lender, and is thus less hassling to you.
On the downside, you could be giving up some benefits that your current loans provide such as loan cancellation and deferment eligibility. If you're convinced of consolidating your loans, think and try to weigh these things in mind. These are just some of the things you have to consider before you consolidate college loans. It's up to you to decide if the pros outweigh the cons, or the other way around.
Discover why it's wise to consolidate college loans. Get more info on school loans consolidation online.