30 Jun Should You Be Thinking About Consolidating Your Student Loans Now?

When should you think about repaying your student loans? I always tell my students and parents to start thinking about payment before they ever receive the money, because student loan debt can affect the student and the family’s financial situation for many years to come. Be acutely aware of how much money you borrow, borrow only what you need, and understand exactly how much it will cost you to repay these loans.

If you are a college student who just graduated, there is a little more urgency in this thought process. You may start receiving payment due notices before the end of the year, and need to have a sound strategy in place before then. Since most students take out numerous student loans over the course of their college career, it can become overwhelming trying to figure out the total amount due and keep on top of the monthly payments. One possibility you will want to research now is student loan consolidation.

Student loan consolidation is the process of taking all of your outstanding student loans and bundling them into one. It may be similar to consolidating your credit card payments. You may have a number of credit cards at different interest rates from different credit card companies, and decide that it is getting too complex to manage. You take out a personal loan to cover the cost of those debts and then make monthly payments on the personal loan. The same principle is true with your student loans, but you must first be sure to separate your debt into federal student loans and private student loans because they cannot be mixed for consolidation.

A Direct Consolidation Loan allows you to consolidate or combine multiple federal education loans into one loan. The result is a single monthly payment instead of multiple payments. There is no application fee to consolidate your federal student loans. Loan consolidation for these loans can greatly simplify loan repayment by centralizing them into one bill. It can also lower monthly payments by giving you up to 30 years to repay your loans. There might be additional access to alternative repayment plans you would not have had before, and you could be able to switch any variable interest rate loans to a fixed interest rate if you believe that interest rates are going to increase.

Although it might seem like a no-brainer, there are downsides to consider. Increasing the length of repayment might mean that you end up making more payments and paying more in interest. You could also be in danger of losing some of your original borrower benefits. Depending on your original loan, this might include interest rate discounts, principal rebates, or some loan cancellation benefits.

Similar benefits and potential negatives apply to the consolidation of private student loans. That is why now is definitely the time to think about loan consolidation, so you can make decisions that are best for your individual financial situation.