Before I discuss the benefits and disadvantages of consolidating your student loans, let me discuss a few factors that should help determine whether or not you need to consolidate.
Consider the following questions in deciding if student loan consolidation is the right financial aid decision for you:
-Are your monthly payments currently manageable? A student consolidation loan may help you in paying for college if you have a hard time meeting your monthly payments, have exhausted your forbearance/deferment options, or want to avoid default.
-Too many monthly payments? If you have taken out several different loans, chances are that you have several payments to make for different lenders each month, which can become a hassle. If you want the convenience of a single monthly payment, you have another good reason to consolidate
-How many payments are left on your student loans? If you are close to paying your loans off, it is probably not worth the effort to consolidate and extend you payments.
-How much money are you willing to pay in the long run? Remember that extending the years of repayment increases the total amount that you will have to pay back, due to more interest accumulation.
-What are the interest rates of your loans? You may want to consider student loan consolidation if you have Federal education loans with variable interest rates. Direct Consolidation Loans will have a fixed interest rate for the entire repayment period. As I mentioned in a previous post on student consolidation loans, this interest rate will be based on the weighted average of the interest rates of the different loans being consolidated.
Jan 3, 2009
