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When Should You Consolidate Student Loans?
College students seeking loans must apply each semester to pay for their coursework. In the pursuit of a four-year degree, those loans add up quickly. Depending on your total tuition costs, and the amounts for which you qualify with each individual lender, you can easily end up with a dozen or more loans to pay off when you graduate. Since this is a lot of different payments to make each month, you may want to consider the option of loan consolidation.
What is Student Loan Consolidation?
First, it’s important to make the distinction between two very different terms that are sometimes confused: loan consolidation and consolidation loans.
- Student loan consolidation, a form of debt consolidation, is a program by which you can combine separate loans or debts into one monthly payment at a reduced rate. Additionally, a debt consolidator will offer credit counseling and money management assistance. These are tools that will help you now and in the future to maintain a balanced budget.
- Consolidation loans involve additional borrowing. They will absorb your current debts, providing a single monthly payment, but with potentially higher interest rates at longer terms. This results in you paying more over the term of the new loan than what you had originally owed. We never advocate consolidation loans.
Signs That It May be Time
According to the Institute for College Access and Success (TICAS), 69% of graduating seniors from private and public colleges in 2013 had student loans, averaging $28,400. Carrying that kind of debt into the current job market is a daunting task, so if any of the following circumstances apply to you, it may be time to consolidate your loans:
- You have difficulty meeting your financial obligations as currently structured.
- You feel like you need to simplify your budget.
- You existing student loans have higher interest rates than what is currently available.
What to Consider
Before you decide on student loan consolidation, there a few things to keep in mind. Circumstances differ for every student, and your own personal situation will determine whether it’s time to consolidate your loans.
- Your types of loans – While most federal student loans are eligible for consolidation, private education loans are not.
- Your financial situation – This is simply your ability to repay the debt that you have. Can you even afford current monthly payments?
- Benefits or options available to you through your current lenders – some of these may be forfeited should you pursue consolidation.
At the end of the day, if your student debt burdens are too heavy and you find you’re unable to make regular payments, loan consolidation might be the solution for you. Our counselors are more than happy to talk through the different options available to you based on your own personal situation. Feel free to give us a call at 1-800-500-6489 today to learn more or you can read on below for more insights on student loans and how they work.
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