The total college experience is something that is almost required to be successful in society; however, the cost can put many students at a disadvantage.
Graduates today often have not one but many student loans to pay off and if they plan for post-graduate studies they can expect to have even larger debts. In some cases, in order to afford the nice house and a car you'll have to pay for an education that costs about the same as a nice house and a car. Students with several loans to pay off may be burdened by debt for a very long time. Sometimes the best way to deal with several debts is to consolidate them into one debt so that you can focus your repayment on one amount and one interest.
This isn't the right approach for everyone and student loan debt can be difficult to consolidate depending on the kind you have. Is it the right approach to dealing with debt for you? Here are the advantages and disadvantages of combining your student loans.
The most obvious advantage is the fact that you can turn several monthly payments into one and you can potentially pay less in interest than if you leave your debts separate. This is not only beneficial organizationally; it is also good for your bottom line. However, there are some other benefits as well. A new consolidated student loan may offer a better repayment plan than the ones you have currently. Typically, a good consolidation program will give you more than just a few repayment options. Some even have payment plans that are based on your income. This means you can adapt your monthly payments to your earnings. Ideally, this will ensure that your monthly payments are never more than you can handle.
Another attractive feature that comes with consolidation is fixed interest rates. Many student loans have variable interest rates, which mean the interest you pay can fluctuate. Consolidated loans often have fixed interest rates; this means the interest you pay will not change. That allows you to predict your payments accurately and it allows you to create a repayment plan that is more comprehensive than if you have several variable interests do deal with.
Despite the advantages, there are a few disadvantages that should cause you to stop and think before you consolidate. Sometimes consolidating your loans can ultimately cause you to pay more. When you consolidate you may set up a payment plan that gives you more time to pay off your loans. For example, you may have 10 years to repay a student loan before consolidation and 20 years after. This will make your monthly payments smaller and more manageable but it will also mean it takes longer for you to become debt free. The longer you are paying off a debt, the more interest you will accumulate. In the long run, the interest you pay may be much more than if you didn't consolidate.
What should you do?
Consolidation is a great option for anyone who is in danger of not making their payments each month. If your struggle to meet payment deadlines is putting you at risk of incurring fees and penalties, you should seriously consider consolidation. If you are making payments on time, there is less incentive for you to consolidate.