By: Emily Ferreira, Managing EditorStudent loans can be a great way to get you through college, but eventually they must be paid back! When graduation day finally arrives, you may have more on your mind than how your cap and gown look. Student loans, while a great opportunity, can actually become quite a burden once school is over. This is why student loan consolidation can be such a great option for recent graduates! You want to start off on the best financial foot possible after graduation and student loan consolidation can help you achieve this goal. Student loan consolidation can be simple, but you may want to consult a financial specialist if you’re uncertain about the process. Student loan consolidation occurs when you consolidate student loans, or, combine multiple college loans with varying repayment schedules into just one loan, either a Federal Family Education Loan Consolidation Loan or a Direct Consolidation Loan. Some students may not understand why a consolidation program can be a good idea. Student loan consolidation allows you to make one monthly repayment and often reduces your monthly payment while permitting you a longer period of time over which to repay your student loan. Also, the interest rate on your student loan consolidation loan might be lower than you were previously expected to pay on your existing student loans.
There are things to be aware of prior to considering student loan consolidation as an option. Though student loan consolidation can significantly lower your monthly payments, by up to 60% in some cases, if you consolidate student loans, you could end up increasing the total amount you will need to repay over the life of your loan. Prior to considering student loan consolidations, you should carefully evaluate the interest rate and the loan terms you will be agreeing to. Another good tip about student loan consolidation is to carefully compare different lenders offering the service to make sure the one you’re thinking about offers a desirable student loan consolidation program.
A student loan consolidation program can be very helpful, and there are several out there to choose from! A consolidation program is unique as they offer certain benefits that would only come with student loans. These include not having to qualify for student loan consolidation based upon your credit score as well as the ability to potentially postpone repayment on your student loan consolidations. Additionally, there is no maximum lending amount available so you are able to lump all of your student loans together, or, consolidate student loans completely. Though this may not necessarily be in the front of a young graduates’ mind, all student loan consolidation debts are discharged at the death of borrowers. The last huge benefit is that all interest paid on student loans or during a consolidation program may be tax deductible!
Student loan consolidation doesn’t just have to be for you. You may consolidate student loans jointly, with your spouse. This may not necessarily prove to be as beneficial as independent student loan consolidation though, since, if you need to defer your payments, you must both qualify for deferment. Similarly, if you consolidate student loans with your spouse and one of you should die, the surviving party would be required to pay off the deceased’s loan. Another complication would be divorce, since the student loan consolidations are still held jointly.
When considering student loan consolidation, you may wonder about the right time to consolidate student loans. Generally, you can consolidate student loans during your grace period or during repayment itself. You may also get student loan consolidations before you graduate; the timing depends on several factors. Student loan consolidation during the grace period could provide a lower interest rate for your student loan consolidations. However, you want to avoid consolidating student loans too soon after graduation. Doing so may cause you to lose out on interest subsidies. One last thing to think about is that lower monthly payment you will receive. If that’s what you’re looking for, you may want to try to get an extended repayment plan when researching student loan consolidation programs.
