Student loan consolidation is one way for college graduates to handle multiple student loan debts, which may become burdensome once repayment must begin and these graduates are trying to meet multiple monthly payments and outrun multiple interest rates. However, depending upon the types of student loans a college graduate has, there are certain types of student loan consolidation options which can make dealing with the repayment of student loan debt a little easier.
Obviously, private student loan debt will be consolidated under a private consolidation loan. These loans usually resemble traditional debt consolidation loans and an interest rate may be given based on the borrower’s credit history and on the loans that are being consolidated. However, there are certain types of loans that cannot be consolidated and anyone who has a combination of federal student loans and private loans usually cannot consolidate their private loans with their federal student loans under a federal consolidation plan.
Usually, federal student loans will have lower interest rates than private student loans, seeing as how many federal loans that are consolidated under a Direct Consolidation Loan are fixed in interest and cannot exceed 8.25%, according to the Direct Loans website. However, there are those who may get a lower rate on a private student loan consolidation, depending on their financial situation.
Federal consolidation loans are, obviously, beneficial for federal student loan debt but student loans from the federal government sometimes may not consolidate as well. For instance, subsidized loans and unsubsidized loans typically will not consolidate under a federal student loan consolidation plan. For this reason, students who are considering a consolidation loan on their student loan debt must look at their student loan situation before proceeding.
Also, federal student loans may have options that can help graduates handle the repayment of their college debt if they are having trouble. Forbearance and deferment options may be available for some, while student loan forgiveness may allow certain student loan borrowers to have their debt canceled after a certain period of repayment.
While student loan consolidation plans for both federal student loan debt and private student loans can be beneficial a college graduate will need to assess their student loan situation and their financial position before proceeding. While consolidation plans can make paying student loan debt easier since there is only one monthly payment required, it may extend the lifetime that one must repay their student loan debt and, as a result, may increase the overall amount that one must repay on their student loans.