consolidate student loans

Who Should Consolidate Student Loans And Who Should Not

You may be wondering if it’s in your best interest to consolidate your student loans.

Well, experts say that you can benefit from a consolidation—to a greater or lesser extent—only by taking into account the full details of your personal situation.

For those of you having serious difficulty making your monthly payments, you definitely should look at consolidation as one of the options that can give you some financial relief.

At the same time, you shouldn’t automatically attempt to consolidate your loans if you could qualify for other, potentially more advantageous alternatives like a deferment, which would also lessen your economic burdens.

Also, if you’ve already been paying off your student loans for many years, and are close to retiring that debt, it’s not financially prudent to consolidate and get a loan that would stretch your payments out for a newly extended time period, causing you to pay additional interest charges unnecessarily.

“The average student carries about $20,000 in student loan debt. For someone just starting to earn a salary, or planning to continue their education, this number can be daunting, but it doesn’t have to be a burden,” says Kevin Walker, CEO of Boston-based SimpleTuition, Inc. which helps students, parents, and others objectively compare education financing options.

Using the consolidation comparison tools on SimpleTuition’s Web site, you can compare multiple financing options from a variety of lenders and sort your loan offers by monthly payment, total cost of the loan, number of payments, fees, and annual percentage rates. “

A basic understanding of how and when to consolidate the loans can alleviate confusion and help lower payments from the start,” says Walker.

Walker and other experts, like Robert Shireman of the Project on Student Debt, recommend that college grads not consolidate federal and private loans together.

It’s far better to consolidate those loans separately because federal and private loans have significantly different rates, terms, and fee structures. And by consolidating a government-backed loan with a private loan, you may lose some of the benefits afforded under the federal loan system.

One upside to cash-strapped borrowers is that consolidation can give you more flexibility. With standard federal loans, you’re obligated to pay back your higher education debts in ten years.

That can be tough if you’re on a budget or your income is limited. Depending on the amount of money you owe, a consolidated loan affords you the chance to extend your repayment period to as long as 30 years.

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