Should I Consolidate My Student Loans?
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Just everyone’s situation is different in some way or another when it comes to their finances and outstanding student loans after graduation. If you are trying to decide whether or not you should consolidate your federal student loans, consider the following:
Do you need to free up some cash? Depending on the amount of debt you have left, loan consolidation can help by extending the term of the loan and lowering your monthly payments.
Consider the interest rate – you may be able to lock in at a good rate and save money. If you can get a loan that is a point or more lower than you are currently paying, it may be a good move. Also, if your income increases you can prepay without fear of penalties.
Do you only have a year or two left on your loans, or a balance of just a few thousand dollars left to pay? If so, you may want to reconsider, as switching lenders late in the game may not be worth the hassle when compared with the amount you would have to repay.
If you feel that a student loan consolidation is the answer for you, then do your research – not all consolidation loans are the same. Keep in mind that you are looking for a consolidation loan not a refinance. There are private, government approved lenders or government lenders who will offer various interest rates, benefits like interest rate reductions for on-time payments, the ability to have automatic withdrawal, and so on. You must also keep in mind that you cannot combine public and private loans – if you have multiple private loans or multiple government loans, you can combine those of course.
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