Consolidating Student Loans: Dos and Donts

2007-03-08 10:33:40

( Financial )



Now is the best time to consolidate student loans. A couple of years ago, consolidating student loans came with decreasing interest rates. Sadly this is no longer true as loan interest rates are increasing with gas prices. Consolidate student loans now to lock in a low interest rate. You have no need to worry about interest rates going up in the near future.

If you were able to consolidate student loans last year to take advantage of the lowest interest rates, you may not be eligible for another consolidation. It is possible if you have availed of new loans since last year and you may want to consolidate your old loans with your new ones. It may be more convenient but it is not advisable as the very low rates you have secured last year will be lost with the new consolidation.

If you are married and you want to consolidate student loans with your spouse’s, you may want to think twice about your decision. Student loans especially federal student loans are extinguished or forgiven once the borrower dies. If you have consolidated your student loans with your spouse, you will be the one responsible for the full amount in the event of death or divorce.

It is also a good idea to consolidate private student loans and federal student loans separately. Consolidating private and federal loans will result into a consolidated private loan. Private loans do not allow you to avail of deferred payments if you decide to go back to school. You cannot claim your interest as a tax deduction and you cannot lock in a fixed interest rate.

You should always be aware of the pros and cons when you consolidate student loans. It may be more convenient for you but it may also do more harm than good in the long run.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.