Student Loan

Consolidating Student Loans

Consolidating Student Loans Is Not That Difficult

Consolidating Student Loans Is Not That Difficult

Increasing tuition fee means rising student debt. Students who rely on loans to pay for tuition fee can accumulate 16 or more loans till their graduation. According to a recent study, two out of every three undergraduates celebrate their graduation with some form of student debt.

Consolidating student loans can make it easier to repay them by replacing multiple loans with a single loan and thus streamlining repayment. This, however, is not a one-size-fits-all solution. Debt consolidation solutions don’t work for everybody. So before you think of consolidating your student loans, consider these four things:

#1: What You Owe

Apart from their loan balance, borrowers also need to know the type of loans they took out. Most students have both subsidized and unsubsidized loans. The interest rate on these fluctuated over the years, so ask your loan servicer to verify the rate on each loan.

The interest rate on a consolidation loan depends on the average rate of all loans that are being consolidated. If students combine loans with low-interest rates with those that have a higher rate, they could end up paying more interest in the long run.

It is also important to know whether the loan is federal or private. Although federal loans cannot be consolidated with private loans, private lenders might be more than willing to take over federal loans. However, experts advise not to consolidate private loans with federal loans.

#2: Loan Benefits

Some federal loans offer benefits that others don’t, as long as they are not combined with others. For example, students who took out a Perkins loan can have 100% of their loan forgiven if they join law enforcement, the Peace Corps, the military or become a science teacher. However, if a Perkins loan is consolidated with any other, the benefits would be lost.

On the flip side, consolidating loans could help students qualify for forgiveness options such as the Public Service Loan Program, or the Pay-As-You-Earn repayment plan.

#3: Simplifying Doesn’t Guarantee Savings

Seeking the help of debt consolidation services for student loans can reduce over a dozen loan payments to just one. But that should now be the only reason for consolidating student loans. This is so because although consolidation can bring some immediate relief by extending the term and lowering


#4: Think Short and Long Term

Fresh graduates should not decide to consolidate students loans based on their current financial status. If they are entering into a profession where their annual salary is expected to increase significantly with time, they should avoid consolidation and opt for income-based repayment. If, however, students enter low-income fields with minimal growth prospects, like social work, they should seriously consider consolidation along with an income-based repayment plan.

For more tips and advice on credit cards and debt consolidation solutions, visit Credit Card Solution.

About the author

Willie DeJarnette

Just wanted to provide some basic knowledge of credit cards, credit score, and other credit types financial resources. Always trying to provide an understanding how to use credit cards and basically staying away from financial ruins.

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