Should I Consolidate My College Loans?


What is something that every college graduate wants to do? Save money! Learning the benefits of consolidating college loans can save you a considerable amount of money. Over the length of the loan you could save thousands of dollars that could have been saved for a new apartment, a new house, even a wedding. But the first thing you need to understand is how consolidating college loans work.First let’s focus on what it means to consolidate a college loan. What you are really doing is taking all of your existing college loans and combining them. You are creating one loan that’s made up of all your college loans giving you one payment per month to pay rather than worrying abuot two, three, or four different payments.So let’s talk about how this actually works and how consolidating can benefit you. Many graduates have multiple lenders for their college loans. Lender A gives you a loan and an interest rate of 6%. So for the amount of this one college loan, you are paying 6% on this every year. However, that only covered tuition and you still need a loan to cover living expenses. So you take out another loan with Lender B who gives you a better interest rate at 5%. And finally, at the end of your senior year, you realize you need extra credits to graduate, so you end up taking out another college loan from Lender C at a rate of 5.5% interest to cover summer classes.Wow, that’s alot of loans to pay every month! So, to save some money, you decide to go to Lender D and ask them to consolidate your college loans. Lender D goes out and pays off all your existing college loans to the other three lenders and gives you one loan at an interest rate of 5%. As you can see, you have just saved a considerable amount of money over the length of the loan.To put some reality to this let’s say you have a loan for $35,000. You pay about $350 per month. You also have another loan for $5,000 and pay around $80 per month. So right now, you are paying $430 per month on college loans. By consolidating your college loans, you could be paying around $230 per month from only one single lender. You have just saved $200 per month, or $2,400 per year, and over the length of a 10 year loan that’s $24,000 in savings! By going with one lender, you are lowering the amount of interest you are paying and save thousands of dollars.Now, before you call that number you got from the letter you just received in the mail saying “Consolidate Your College Loans Now”, you need to do some research. You could call an existing lender if you wish, or you can find some websites online. There are plenty of sites out there with lenders who can help. Just make sure you analyze each one and find out what interest rates they will be charging you as well as any other fees that might be part of the deal. This is just as important as anything else so make sure you are getting the best deal possible from a lender! This is why it’s important to compare a few of them. We’re talking about the money that you earned working 40+ hours per week, so make sure you’re not giving away too much of your hard earned money!