Have you thought about consolidating your student loans?
When you graduate from college, reality hits you quick. The student loan payments never seem to stop. You feel overwhelmed because you’re trying to find a job that pays well enough to live a fun life while the bills keep on showing up.
How do you deal with student loans? Should you consolidate your student loans?
Before I dig into the topic of debt consolidation loans for college graduates allow me to give you guys the basics of it.
Student debt consolidation is the process of combining several loans/debts into a lower monthly payment that usually follows with a lower interest rate.
College graduates usually have a 6 month grace period after their graduation where the loan payments don’t kick in. Once the 6 months are up, you’re usually required to start paying back all of your student loans. When college graduates are having issues with repaying their student debt then they have the option of obtaining a debt consolidation loan.
Many of the readers have been asking me questions. Some of the questions I respond to within seconds. Others require some research. I spent a few hours last night researching tips on debt consolidation loans for college students.
The result is the following list of general advice on dealing with a student debt consolidation loan:
Debt consolidation loans will simplify your finances.
Student debt consolidation loans are known for making your debt repayment easier. In fact it will also simplify your monthly finances. If you have 3 or more separate student loans then this may be too much paper work for your to deal with. If you consolidate your student loans you’ll only have to make one monthly payment. You busted your butt for 4 years in college so you deserve some sort of financial buffer as you go through your 20s.
There are issues with consolidating dederal student loans.
One interesting piece of information that I learned about student debt consolidation loans is that some federal loans can not be mixed in and consolidated with certain private loans. You really can’t find out this information until you fill out your application for the debt consolidation loan. Just be warned ahead of time and don’t expect the student debt consolidation loan to be your almighty savior.
Debt consolidation is not ideal for everyone.
Smart debt consolidation will allow you have some breathing room while you search for the perfect job. However, if you’re making your student debt payments every month without any worry then debt consolidation is not ideal for you.
Consolidating student loans is ideal for those that are struggling to make their monthly payments and losing sleep over the issue. If you have a steady income and you are fairly aggressive with your student debt repayment then you should continue on this track instead of consolidating your student loans. Further reading on if you should do a debt consolidation loan.
Consolidating your student loans will lower your payments but…
The debt consolidation loan repayment plan will likely end up costing you more in the long run.
According to a Forbes article on debt consolidation loans for college students: you can stretch out an average student loan from 10 years to 20 years & cut monthly payments by 35%. On the flip side it will take you double the time to pay off your student loans. It all depends on your current financial situation. If you can get aggressive with paying off your student loans then please go for it. If you need financial assistance then just be cautious of the added time to your loan repayment schedule.
We will cover the topic of debt consolidation loans and student loans more often in the future.
Student loan consolidation can be a real “win” for us alumni who have variable rate federal student loans. The rates are really, really low right now, and I can’t see them getting much lower. A consolidation is pretty much the only way to lock those variable rates into a fixed low rate. Just another reason to make sure you know everything you can able the loans you have, including the interest rate and whether or not its variable!
Stephanie and others…
I am a graduate weighing my options with respect to my private student loans. In my research so far I have noticed that consolidation deals may come with tricky, variable interest rates as well. So while locking down the low interest rates your loan provisions already define is a possibility, it is not always the case.
Be mindful when considering offers from companies who want to help you consolidate. Read and re-read the terms you are being offered, especially with respect to the sections dealing with interest rates and loan termination and transferal!
I graduated with 4 loans at pretty high rates. I consolidated in the early 00’s to a low rate. It saved me a bit over the last 8 years, but I suspect not that much. Wish I’d researched it more back then. I just went for the lower rate. Now they are paid off though, so I’m done with it for good.
Yes, it’s true that consolidating a student loan over a longer number of years means you end up paying more interest in the long-run; however, this can be very advantageous if done correctly. If you can lock in a fixed rate of say, 4.25% and make the minimum payment each month, while taking the excess you would have had to pay had you not consolidated and invest it in an instrument that earns say, 6%, the outcome will be very beneficial over the life of the loan. Why pay down a debt at 4.25% so quickly, when there are plenty of opportunities to put your money to work elsewhere. Money is the cheapest it’s been in almost 100 years, take advantage!
I have 4 stafford loans that amount to $83000. The interest rates are as follows: 23k at 1.79%, 15K at 4.5%, 50k at 6.8%. If I consolidate all of them but the lowest interest one I will only be saving around 5-7k. The 23k will be at 10 years, but the rest will be at 25 years. If I combine them all I will get an interest rate of 4.25% for 30 years, but if I only consolidate the higher interest ones I will have a 6% interest rate for 25 years. What should I do?