As a college graduate, two things haunted my dreams: finding a job to support myself and managing my student loan repayment (specifically, whether I should consolidate my student loans or not).
Consolidation is a term many students are unaware of until it’s too late. It allows a person to combine his or her loans into one loan and make one monthly payment.
During my last two years of college, I became more aware about finances and took a greater interest in my student loans. Once I figured out the exact amount of loans I owed, I contacted my financial aid department and asked to receive more information about consolidating my loans. It was a smart decision.
I understand there is a lot going on in your life — I’m right there with you. But it’s important to think about your future financial well-being, and that includes thinking about consolidating your student loans as you consider your student loan repayment options.
Here are some things to consider before choosing to consolidate:
- Consolidation usually reduces the loan into one monthly payment; however, it is spread out over a longer period of time.
- There aren’t prepayment penalties, so if you want to pay more than is required each month, you can.
- The interest rate on a federal consolidation loan is the weighted average on the loans you include rounded up to the nearest 1/8 of a percent. So if you include loans that already have a fixed interest rate (the ones made after July 1, 2006) you may end up paying more over the life of the loan.
- There are a number of other repayment options that might be a good fit as well, like extended repayment for borrowers with over $30,000 in federal student loans.
- Private student loans can’t be included in a Federal consolidation loan; however some private lenders offer private consolidation loans. (Keep in mind that you should never consolidate federal student loans through a private consolidation loan!)
- You can only consolidate federal student loans during the grace period or after the loan enters repayment — NOT while you’re in school.
Think carefully before consolidating your loans! You can’t unconsolidate them, and you might not want to include some loans (like Perkins loans) because you could lose benefits or the interest rate could increase. So be sure to examine your loan information and talk to your lender before making a decision.
I know that’s a lot of info to process, but we’re here to help! Anyone have questions about the consolidation decision?