Reducing education debt through student loan consolidation is a common path for many former students. Consolidation is a great option for many people, but borrowers need to look at their overall financial picture to ensure that it’s right for them. You’re going to be paying on your student loans for the next several years to take time to find the best consolidation option rather than just jumping into the first program you’re introduced to.
For many former students, loan consolidation offers an opportunity to build their credit and get their professional lives started on the right track. Even with the higher overall cost of extended payment terms, borrowers may find the lower monthly payments easier to make at the outset of their careers.
Minimum monthly payments on student loans can be high especially for borrowers with entry-level positions. Many consolidation programs allow graduated repayment schedules which allow the borrower to make lower payments upfront and higher payments as their income grows. Graduated monthly payment programs are a nice option for borrowers with high income growth potential.
Education loan consolidation candidates who start work immediately upon finishing their college careers may want to consolidate to lock in interest rates. Upon consolidation borrowers give up many of their deferment options and begin making payments within 60 days of their consolidation loan signing. For borrowers on sound financial footing the loss of deferment options may be a worthwhile trade-off to lock in a low interest rate.
Lower interest rates on private consolidation loans may also be available for borrowers with outstanding personal credit ratings. Some consolidation programs base their interest rate on each borrower’s personal credit rating allowing those with excellent personal credit history to lock in a low rate for the duration of their consolidation loan. If your credit rating has improved during your school career you may also find that you can lock in a better rate than you had initially on your private loans.
The simplicity of consolidation is another reason many grads choose to put all their loans together in one package. With a single consolidation loan recordkeeping, monthly payments, and tax statements are easier to manage allowing the borrower to focus on their career instead of their debt load. The time-saving a consolidation loan provides is often a benefit in and of itself.
Each borrower needs to look at their own financial picture to determine if consolidation is the best option for them. Consolidation isn’t for everyone. If you can make the minimum monthly payments on your student loans without too much of a struggle and have a small outstanding loan balance it may benefit you to just make the payments and get the loan paid off quickly. Consolidation can dramatically increase the overall cost of your student loan and taking the easy path now because you financial hardship in the future
There many consolidation options for people with education debt. The typical former student will carry their student loans with them for several years after leaving school. A conscientious borrower look at their total financial picture when looking for a consolidation option that works for them.
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