Student Debt Consolidation Loans- Top Questions

This may not be the first time you’ve heard of student debt consolidation loans. It may be however, your first time to seriously consider it as an option after college. If this is the case, you may understandably have a couple of questions about it. Here are the top five questions you should be asking:

What is it exactly?

Not everyone can afford to pay for college education in cash. Thousands of students each year have to rely partly on education loans. Depending on your specific needs, these can cover tuition fees, miscellaneous fees, books and lodging among others. Since lenders provide different kinds of loans, you end up with a number of separate loans to pay after graduation. Through student loan consolidation services however, you can merge all your loans so you only have to make one convenient monthly payment.

Who should be approached for this service?

Lenders themselves may have consolidation programs available. One of your lenders may be able to provide you with an attractive term package. There are however, also a number of third party student loan consolidation services. Naturally though, they would have different terms, policies and conditions. They may also have different fee rates. This means you would have to carefully pick your consolidator.

What are the advantages of consolidation?

As mentioned, student debt consolidation loans will allow you to conveniently make single monthly payments. There are however some added benefits. Many consolidation programs will allow you to extend your payment period. This would also mean that you get to pay lower monthly rates. This is a good option for you if you are not financially able to afford the higher monthly rates of shorter payment terms. A final advantage of consolidated loans is the impression it can help provide to your credit record. It certainly is less of an eyesore to have a single consolidated loan on file than a long list of individual debts.

What are its disadvantages?

Lining up for student loan consolidation services can have its disadvantages too. A major disadvantage is the loss of whatever grace period is available to you. Normally, it is advisable to consolidate your loans during the grace period so you can fix your loan interest rate. Doing so however would mean you have to start paying immediately after your loans are combined. You are no longer eligible for the remaining grace period. Also, student debt consolidation loans may mean higher overall interest paid if you opt for very long payment periods.

Should all loans be consolidated?

It may seem logical to want to consolidate every single loan you incurred in college. This may not always be a wise decision though. This is especially if you have both the federal and the private types of loans. Federal loans have special benefits, such as tax deductibles, that cannot be found in private loans. When you merge these two different types of loans, your federal loan will be treated like a private loan and will lose its benefits. You might want to think twice before you put all your loans in a single basket.

These are only some of the basic facts about student debt consolidation loans. If you are serious about taking this option, make sure you research more about it. Consolidation may or may not be good for you.

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