The Pros and the Cons of Student Loan Consolidation


Being a college or university student requires housing, food, transportation, and sundry other expenses without much, if any, income. Do not even consider tuition, materials and supplies, books, lab fees, student union fees, maybe fraternity or sorority fees, and all the other expenses of college life. That is a lot of money spent on next to no income. To pursue their dreams, many youngsters rely on student loans to see them through these lean years.Thankfully, the interest rates on such loans are lower than the market rates and the time for repayment is significantly longer than for conventional loans. Indeed, some students have found the need to take out more than one student loan. Paying back multiple loans, each with a different creditor, each with a different payment amount, each with a different monthly due date, and each with its own interest rate, can be a real pain.Student Loan ConsolidationStudent loan consolidation can greatly simplify budgets. All those student loans are paid off by one large loan. One payment, in one amount, to one lender, at one interest rate makes life easier. The monthly payment will probably be much less than the sum of the multiple payments, and student loan consolidations usually have lower interest rates than conventional loans.Two basic types of student debt consolidation loans exist: Federal student consolidation loans and private student consolidation loans. Student debt consolidation loans have advantages and disadvantages.Advantages of Student Loan ConsolidationOne: The interest rates on these loans are fixed, which helps you keep a steady budget.Two: The interest rates are considerable lower than those for conventional loans.Three: Only one payment, on one day, to one lender, at one interest rate. This also helps to keep a personal monthly budget intact.Four: Repayment is allowed over an extended period of time. Indeed, some will string out very low monthly payments for up to 30 years.Five: The application process is uncomplicated and no extra fees are charged for student loan consolidations.Six: There are no penalties should the borrower decide to pay off the loan early.Disadvantages of Student Loan ConsolidationOne: Extended payment periods and the accompanying low payments make it seem like you are not spending a lot of money. If payments are stretched out over many years, you could end up paying far more than the original amount of the loan.Two: Sometimes a lender will offer a consolidation loan that has slightly higher rates than the multiple loans. Check interest rates and read the fine print carefully. Sticking with the multiple loans that have lower interest rates could save you a lot of money in the long run.Three: Before taking a consolidation loan, consider the maturity of your multiple loans. If they are all near being paid off, consolidation would not benefit you, unless you are consolidating to lower your monthly payment obligations.Four: Loans consolidated within the grace period would require immediate pay off.Without student loans, millions of students would have not been able to pursue their dreams of employment in a field they relish and a satisfying life. Consolidating student loans can be a great financial relief. Consider the pros and cons carefully before choosing to consolidate your student loans.