Is It Better To Consolidate My Student Loans?

If you’re like most college graduates, you may hold several student loans. It may leave you wondering Is it better to consolidate my student loans? Consolidation has some advantages and disadvantages. Here are a few things to ask before you make the decision.

How’s My Interest Rate?

If you have private student loans with high interest rates, you may be able to save some money by taking advantage of a consolidation. Since a consolidation is actually a new loan, the new lender purchases the debt from the original lender. Many times the new lender is able to offer you a deal on the interest rate since they won’t be paying the interest on the original loan. This is a good choice if you’re able to find a consolidation program that will shave several points off the interest rate.

How Much Longer Am I Paying On My Loans?

This is an important question to ask yourself. If you are already in the repayment part of your current loan, and you’ve been paying on it for some time, then consolidation may not be a good choice. When you consolidate a loan you are basically taking out a new loan. This may make your monthly payments lower, but it can extend the life of the loan. If you have a 30 year term and you consolidate after 5 years of payment, you will be paying on the loan for another 30 years. So in essence, that original 30 year term now becomes 35. If you haven’t been paying on it for a long time, then it may be a good option for you to save money.

Are My Monthly Payments Manageable

Sometimes life gets in the way of our plans. While five years ago you may have been able to make your payments without any issue, that may not be the case today. If you’re in a crunch and making your payments is becoming increasingly more difficult, then consolidation can save you a huge headache. Many times it will lower the cost of your monthly payment. Keep in mind though that you will need to pay over a longer period of time.