Should you consolidate student loans or no? Six months after your college graduation you are required to begin paying down your student loans. At this point college graduates usually decide whether they will pursue debt consolidation loans.
Today I wanted to share a few things to consider as your mind tries to decide whether student loans consolidation is the best option at the moment:
What is the interest rate on your student loans?
Student loan consolidation rates vary greatly. The unfortunate part is that you may lose a specific low interest rate that you currently have because the debt consolidation loan may not give you the lowest rate possible. At the end of the day, juggling a bunch of different interest rates make no sense. If you can lock in one low rate that you are comfortable with then go for it.
Do you currently have federal student loans or private student loans?
It is a lot easier when your student loans consolidation involves all federal loans. Private student loans are not as easy to consolidate and will usually require more research to find loan consolidation services.
Are you struggling with making the current monthly payment on your student loans?
Depending on your field it could be extremely difficult to find a job during the current recession. If you are struggling to find the ideal job then you are most likely working a part time gig where you barely earn enough income to put money towards your student loan repayment. This is where student loans consolidation becomes the perfect solution. You do not want to put yourself in a situation where you begin working a job you hate just to pay the bills. It can turn into a viscous cycle that will have a negative affect on your overall health and happiness. A student consolidation loan isn’t a quick fix but it will give you some breathing space as you continue on in your job hunt.
Just please remember that you will lower the monthly payments on your student loan but you will end up paying more in the long run.
Are you thinking of following your passions to earn money?
College student loans consolidation becomes very handy when your income is either really low or extremely unstable. Unfortunately, these are two characteristics that describe your income when you first decide to start a business through following your passions.
If you find yourself with a labor of love, where you love what you do but the money is not quite there yet, then you can do one of two things:
1. Find a job that will help you pay off your student debt/improve your monthly payments towards your student debt.
or
2. Look into student loans consolidation in order to reduce your monthly payment so that you won’t have to stress about your fluctuating income.
Once you answer the above questions you will have a better understanding if student loans consolidation is the right option for you. Where do you stand at the moment?
The biggest financial mistakes I have made in my life was consolidating my federal loans. After graduating from law school with nearly 130K in student loans, I consolidated to take advantage of the six month deferral on consolidations. What I didn’t know at the time was that an interest deduction opportunity existed for those who did not consolidate–after three years of on-time payments, your interest rate goes to 0% for the life of the loan, assuming on time payments. Instead of moving heaven and earth to pay the loan for three years, and thus take advantage of 0% rate opportunity, I consolidated and locked in the $75K federal loan at 6.5%. You can probably do the math as to how much this mistake will cost me over the 25 year loan. Just a bit of food for thought to educate yourself on all possible options before consolidating.
Thanks, this is essential information. Agree totally that students should research each loan option separately and carefully before deciding on consolidation or other types of private loan.