Should You Consolidate Your Student Loans?
Deciding whether or not to consolidate your student loans can be a difficult choice. We've listed a few helpful pointers here to help you decide.
Consolidating Your Student Loans
With graduation quickly approaching, you're probably thinking all about your future. What job will you get, where will you live and how on earth will you pay for your student loans? That one is particularly tough. You might be able to save some money by consolidating your loans, but what's the catch?
As you make your way through your college career, there's something you may wonder about: how am I going to pay for all this? Somewhere in the back of your mind, you're probably thinking about all that debt piling up from your student loans. It seems daunting, doesn't it? So much money owed to so many different people is just a hard thing to handle. Maybe it's a good idea to consolidate your loans. But what exactly is loan consolidation and what does it do for you?
One Payment to One Place
Loan consolidation basically means that you'll be taking out one new big loan to pay off all your other ones. It seems strange that to save money you'll have to spend more money initially, but it can pay off in the end. The idea is that instead of paying money to a bunch of different places, you'll now only be making one regular payment to one place.
One of the major pluses of this is the efficiency and convenience of only owing one place money. It becomes easier to figure out how much you owe to who and when. Many banks can even offer you an automatic payment plan so you never forget to send out the money.
Lower Interest Rates
Another advantage of consolidation is that you'll likely be getting better overall interest rates. Sure, some of your loans may have pretty good interest rates and rewards, but what about your loan interest rates that aren't so great? Chances are they all balance out to a somewhat higher interest rate than a single consolidated loan would have. You may also have to deal with different fluctuating rates in all your loans, which can be confusing and can make budgeting your money for the month difficult. When you only have one low interest rate to deal with, a little fluctuation is easy to keep track of and fit into your monthly spending.
The Student Assistance Act
There is a nifty little act that's out there to help students deal with their debt after college. The Student Assistance Act makes it so that you can extend your loan for a few to even 20 or 30 years. What this means is that you do not have to pay nearly as much a month, which makes the mountain of debt go away more slowly, but with much greater ease. Sounds good, so what's the catch? The catch is that you can only do it once. This is where loan consolidation comes in. You can use this act for one of the many loans you have and then deal with your other loans regularly, or you can make life easier on yourself. You can consolidate your loans into one, and then you'll be able to take advantage of the Student Assistance Act and pay less per month than you usually would.
Make Sure You Do the Math
Considering all these factors, loan consolidation sounds like a pretty sweet deal. Lower interest rates, more convenient payment methods and possibly even lower monthly payments. All of this adds up to less money you have to pay in the long run. Or does it? When considering loan consolidation it is important to shop around and then do the math. It could be that all your loans actually do have better interest rates or payment programs, so consolidating doesn't actually save you any money. Some small companies also offer rewards for paying on time or more leniency on when and how you pay. If you have private loans, consolidating can be a bit tricky or even downright impossible, though many companies will try to help you with refinancing if you really need it. All in all, it's just smart to check your interest rates and payment plans before you consolidate, just in case it isn't the best deal for you after all.
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