Consolidating School Loans: Pros and Cons

2007-03-08 10:33:40

( Financial )



Once out of college, you will be faced with real life responsibilities. One of these responsibilities is taking care of your debts. It was very convenient for you to have financial aid during the time you were in college. You had money for books, for board and for food. Now that you are a graduate, you need to pay off your debts.

Most students have multiple loans. Some have all private loans, some all federal grants. Most have a combination of the two. The first thing you should do after graduation is consolidate school loans. Consolidating your loans will not only be more convenient because you only need to pay one lender, it can also lessen your monthly payments.

You can approach your local student center for assistance on how to consolidate school loans. You need to fill in the paper work before your grace period expires and repayment begins. This way, you will be able to take advantage of lower in-school rates which you cannot avail after your grace period.

When you consolidate school loans, it is a good idea to separate private from federal loans. If you opt to consolidate both into one loan, all your loans will become private loans. Unlike federal grants, private loans are not forgiven in the event of death. You cannot plea forbearance if you enter military service. And federal loan interest rates are typically lower than private ones.

It is also a good idea not to consolidate school loans with your spouse. In the event of death, you will be responsible for both your debts. If you divorce in the future and your spouse fails to pay his or her part of the monthly dues, you will also be responsible for it.

Consolidating college loans is a good idea as you only pay one lending institution. You can stretch your repayment schedule to 30 years. It has a positive impact on your credit rating because it will show your student loans have been fully paid.


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