Student Loan Consolidations – Benefits and Costs

2007-03-08 10:33:40

( Financial )



With increasing tuition costs, more and more students find it necessary to take out a loan and often several loans to finance their education. When it comes to paying off these loans, however, many students and graduates who just started out on a job face difficulty doing so. For those in this situation, a student loan consolidation is a good option to consider.

The Benefits

When you get a student loan debt consolidation, the lender will merge the different loans you have into a single loan to pay off all your other loans. With unconsolidated loans, you most likely have varying rates and repayment terms. For example, one loan will have a fixed rate with a 5-year repayment term and another loan may have a variable interest rate with a 10-year repayment term. When you consolidate these loans, you only deal with one loan and one lender. Instead of having multiple bills to pay, you make a single monthly payment to your loan consolidation lender. This makes monthly loan payments a lot easier to manage.

You can arrange a repayment plan suitable to your needs. Typically, student loan consolidations have long repayment terms, often up to 30 years. The obvious advantage of long-term loans, besides having more time to pay, is lower monthly payments.

Student loan consolidations allow students and recent graduates the breathing space in their finances when they are still in the effort of improving their income.

The Costs

Consolidating your loans has many benefits but you do not want to rush into another commitment without being aware of everything that is involved. While, student loan consolidations offer you longer time to pay and lower monthly payments, you pay more interest overtime. Even if you have a low interest rate, the longer it takes you to pay back a loan, the higher the overall amount of interest will be.

In addition, you can expect to pay lender’s fees or consolidation fees as with any loan consolidation program. Watch out for hidden costs. Make sure you know exactly what kinds of fees and how much you will have to pay, including how many fees they charge.


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