Student Loan Consolidation

Graduating students face a very difficult situation at present. Jobs are few in the market and the student loans taken out until now suddenly begin to look ominous. Student loan consolidation is one of the options available to students to figure out how exactly they would like to repay their loans.

In the course of going through college students may take out loans from different sources. Each of these loans has different terms and interest rates. Individually attending to them and sending out monthly payments can tend to get complicated. When doubts regarding this sort of settlement arise it’s usually a good option to consider a consolidation plan.There are many benefits that come with student loan consolidation. One loan with one monthly payment usually translates to a lower fixed rate of interest. Fixed lower monthly installments increase financial flexibility for the student. It also would contribute to a better credit score as the list of creditors is reduced. Repayment terms could extend to as much as 30 years. This extended period of time does reduce the burden on a student. Though one might see that over such a long period of time interest paid will be considerable, the day to day burden gets spread out and does not overwhelm the student over short periods.

There are federal and private options that are available to someone who considers student loan consolidation. Interest rates are capped at a maximum of 8.25%. The interest rate that is assigned to a particular student will depend on the weighted average of the interest rates of the loans taken by the student.

There are a few downsides that come with loan consolidation. A long term repayment plan will cause the student to pay a substantially higher amount due to interests. If a student is able to pay back loans in a shorter period of time, it is advisable that they do so. Fixed interest rates do sound good, under the assumption that interest rates will increase in the long run. But if rates do drop, the locked in rates will force the student to pay at a higher rate than the current rate. When choosing to consolidate, students need to look at the upside and downside before going ahead.


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