Benefits Of Student Loan Consolidation

Benefits Of Student Loan Consolidation


If you used any type of federally-funded student loans to finance your higher education, and are now out of school, by now you have received numerous telephone calls, mail pieces, and emails extolling the benefits of student loan consolidation. Let"s go over what those benefits are:
• A lower monthly payment- One major benefit of student loan consolidation is that consolidation results in lowering the monthly payment that you must make in order to keep your loans current. This is especially appealing to recent college graduates, who are just getting started in their careers, and also to those former students who were forced to terminate their education before they could finish their degrees. In these days of tight budgets, a strained US economy, scarcer job prospects, lower wages, and higher consumer prices for everything from food to gasoline and energy, a lower payment means more money to spend on other essentials and maybe even a small indulgence or two once in a while. The downside of having a lower payment is that it is usually created by stretching out the term of the loan over more months or years, making the total amount repaid considerably more.
• Locking in a lower, fixed interest rate- This benefit has everything to do with whether your current loans have fixed or variable rates, and also the timing of your consolidation. Companies that aggressively pursue holders of student loans paint the picture of student loan consolidation protecting you against rising interest rates. If you are considering consolidation your loans, make sure that you do your homework regarding what interest rates are currently available, and whether your current loans have a fixed or a variable rate over the life of the loan.
• Only one monthly payment- For those with multiple loans from various sources, consolidating your many and sundry loans into one will be a great convenience to you in that you will now have only one monthly student loan payment to make. Not only is having only one payment to make each month a great time and money saver, especially if you are writing checks rather than paying by automatic debit, but it will protect you against "forgetting about" one of your loans, and having it go delinquent.
• If you have recently graduated or left school, you have what is called a six month "grace period". If you consolidate your student loans during the grace period, many times you can enjoy an even further reduction in interest. Some student loan consolidation lenders give you further reductions in your interest rate for using an automatic debit payment method, and for making a certain number of consecutive payments on time.
• Some lenders penalize you for paying off your loans early. Consolidation of your student loans affords the extra benefit of enabling you to pay these loans off with no pre-payment penalty. As always, check the fine print of the agreement (and have somebody else look at it if you are not money-savvy) before you sign!