Student Loan Consolidation
Many students with Federal and private loans find advantages in student loan consolidation, since it may provide a significant advantage over the maintenance and interest rates involved in individual loans. Consolidation allows a student who's entered the repayment phase of his or her career to merge their existing loans into a single monthly payment. Whether this is worthwhile must be judged on a case-by-case basis; if a student's existing loans were made at a very low percentage rate, student loan consolidation may not lower their monthly payment or total interest payment. Those interested in these programs must also have at least $5,000 worth of outstanding loans in order to qualify. Some of the potential advantages are discussed below.
Many students are forced to manage multiple loans from multiple sources. They may have Stafford or other Federal loans, along with one or more private loans made from banks, credit unions, or other institutions. They may also owe money to relatives who have assisted the student by investing in their online college education. If this is the case, student loan consolidation can have the simple effect of allowing the student to make a single payment per month, thus reducing the overhead of managing their loans.
Additionally, some private loans come with variable interest rates that may be determined by the prime interest rate and other factors. If student Credit Card interest rates rise, the student may find their monthly payments rising along with it. This can stress anyone's finances, and there's no reason to keep paying a higher interest rate when alternatives are available. In this case, student loan consolidation should be explored to determine whether current rates on consolidated loans are better than those already being paid. Consolidation typically produces a single loan at a fixed rate.
Loan term is another consideration. Typically, Stafford and other Federal loans must be repaid within ten years of completion of the student's degree program. While this term can often be extended, student loan consolidation may permit the student to both extend the term of their loan while simultaneously lowering the interest rate.
Generally, someone considering student loan consolidation should examine the amount and term of their loans, along with prevailing interest rates and their ability to manage their existing monthly debt. Those interested in these programs should contact Sallie Mae or another lender offering student loan consolidation programs to determine the savings they'll enjoy from consolidation.
