Sunday, 29 September 2019

Pros and Cons Of Consolidating Student Loans

Today's article I will be talking about the federal student loan consolidation program. I know a lot of you all may be graduating college and you may have taken out student loans to help you pay for your college education. So, keep reading, there may be some important information here to help you out.

Pro: One Payment: One Monthly Payment Service By One Lending Company. 

When you take out student loans, you have multiple student loans and your student loans are serviced by multiple companies. Well, to make things a lot easier for you, you would consolidate all of your student loans into one lump sum, that way you have one monthly payment to one lending institution.

Pro: One Fixed Interest Rate

When you take out student loans. You have different interest rates per loan. So, what happens is when you consolidate the loans into one lump sum, the lending institution will take the weighted average to give you what your new interest rate is going to be on the one loan that you make payments on per month. 

Pro: Lower Payments

Loans are extended by 15, 20, 30 years. Are you just graduating, you are just getting started in your career, you will have lower payments, typically your payments are reduced by 50%. But the lifetime of the loan will be extended to 15, 20, or 30 years. I would say as you get going in your career, put more money towards paying down your debt. So, you are not paying more money and interest over the long haul of the life of that loan.

Pro: You Have Multiple Repayment Plans

You are still eligible for multiple repayment plans such as income base, graduated, standard, and extended.

Pro: You Can Consolidate Any Dollar Amount

For example, let's say your student loan still up to $10,000, $15,000, $20,000, $30,000, you are still eligible to any dollar amount. There is no minimum requirement.

Pro: You Are Still Eligible For Deferment and For Forbearance

Now, let's take a look at the cons side.

Con: Repayment Starts Soon

After you consolidate your student loans into one lump sum. Repayment normally starts two months after consolidation.

Con: The Interest Rate You Agree To Is What You Get

If you feel like, hey, I may want to consolidate my student loans, they gave me an interest rate, I don't feel too comfortable with this interest rate. You don't have to go through with the consolidation, you can cancel it. But make sure you cancel it by the deadline.

Con: You Can Lose Any Benefits From Any Previous Lenders.

Sometimes your previous lenders may give you a benefit such as principal reduction or interest rates. So, once you go over to the new lender, guess what, you are going to lose any of those benefits. So, I would find out before I get my consolidation, what are the new benefits I am going to get with this particular company.

Con: Private Loans Are Not Eligible.

For the federal student loan consolidation program. Private loans are not eligible. I know some you may say well, yeah I have consolidated my federal private loans, yes, you can consolidate federal and private loans. But it has to be through a private lender such as a bank. So, if you have federal student loans and you have private loans. You can combine both of them, but it has to be through a private lending institution such as maybe Wells Fargo if you decide to go with them. 

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