The Pros and Cons of Student Loan Consolidation

Most individuals leave college with huge amounts of student loans. However, repaying that debt is much more stressful than it was to receive the loan in the first place.Since about 67% of college graduates finish college with some sort of debt, there needs to be a way to help consolidate and ease this financial burden. Some believe that consolidating their loans will help lower their monthly payments and make life easier. This will not always work for all people.However, federal loans can not be consolidated with private loans, and student loan interest is now fixed. In the past, the variable rates could possibly be consolidated with lower fixed rates. Now, “there is no financial benefit to consolidating federal loans, other than having a single monthly payment and access to alternative repayment plans,” says Mark Kantrowitz, publisher of FinAid, a Web web page that tracks the college financial aid industry.If you can not make your monthly payments, consolidation might assistance you. However, it’ll cost you in the long run in interest payments. You have to weigh the benefits of lowering your monthly payments now towards longer term costs associated with student loan consolidation.Starting last July (2009), borrowers who have federal student loans can apply for an income-based repayment plan. This might be a smart selection for those entering low paying fields. This would cap monthly payments based on income.If you decide to consolidate your student loan, be sure to ask if it charges origination fees or prepayment penalties. Avoid any loan that charges a prepayment penalty. You should be wary belonging to the maximum interest rate, and the term of the loan. Also, be sure to ASK QUESTIONS if you are unsure about any aspect of your loan.Good luck!