Pros and Cons of Student Loan Consolidation

Student loan consolidation is something students are beginning to consider because of the potential benefits that it can have on a long term basis. Like with most financial matters, student loan consolidation isn’t all about positives, though. There are quite a few negatives to consider before pulling the trigger on consolidation. By considering all of the potential pros and cons, students and their parents can be sure to make an informed, responsible decision with their loan.The pros of student loan consolidation are many. The most glaringly obvious positive to consolidating your student loans is the fact that consolidation can lead to reduced payments and interest rates. For students that have years of loans under their belt, this can be an important money saver and a way to jumpstart a financial future. Obviously, the resulting interest rate must be lower for the consolidation that in the prior loans.As with most loan consolidations, there is the positive of having the loan more organized. Though a loan is something that college graduates should be able to keep up with, it never hurts to have only one payment instead of having to remember to make three or four different payments. With student loan consolidation, this is made possible. With only one payment being due, there’s also the hope that your credit rating could be improved over the course of time.Though the positives of student loan consolidation certain make it seem like something that all students should look into, there are also a few potential negatives for students and their parents to consider. Student loan consolidation is quite final, meaning that a decision to consolidate your student loans can not be reversed or changed. Once the consolidation is agreed upon, the student loans are paid off in full by the consolidating company and your payment responsibilities are shifted.In addition to being final, student loan consolidation can be quite tricky. In order to gain this consolidation, one must work hard to find a reputable bank that is willing to lend the money. In addition to that, there’s the problem of finding an acceptable interest rate as compared to the old rates. Because student loans can be both private and government funded, borrowers must weigh the risk of taking the government backing off of their loans.Student loan consolidation must be done on two different fronts, which makes it especially troubling. The refinancing of federal student loans can be done at a very low interest rate and coupled with government backing, makes for a very easy transaction. Private student loans must be refinanced and consolidated separately, creating another hassle. Potential borrowers will find it especially difficult to find suitors in today’s market. Lenders have tightened up their credit requirements, making it difficult for students to finance such loans with their lack of credit history.There are many positives and negatives that come with the school loan consolidation process. Though it can be a way to stay organized and lower the payments, student loan consolidation is a little bit of a risk. Having such a large, unsecured loan in one place can have an ill impact on a person’s credit and can be quite a responsibility for young adults.