Many student loans offer consolidation plans for college graduates who may have trouble repaying various forms of student loan debt. While there are certain constraints on what types of loans may be available for consolidation, many college graduates have used student loan consolidation plans as a way to roll all of their college debt into one monthly payment under one interest rate.
Both private and federal student loan consolidation plans have been used in the past to make student loan payments easier. Obviously, one monthly payment on student loan debt may be more affordable than various student loan debt obligations, but there are certain financial advisors who believe that student loan consolidation plans may not always be in a graduate’s best interest.
Typically, private student loans cannot be consolidated under a federal student loan plan so if a college graduate has various types of debt they may not benefit from consolidating. Also, federal unsubsidized student loans can not be consolidated with subsidized loans, in many cases, so again this is a situation where college graduates who are considering a consolidation loan on their student loan debt must make sure their college loans will in fact consolidate.
There is also the concern that in cases where only a few student loan debt obligations are present, students may end up paying more money if they consolidate their debt rather than kept their debts separate. If a student only has a few student loans outstanding, the idea is that they can more quickly combat these smaller debt amounts separately rather than if they roll these debt sources into one large student loan consolidation plan. Even at an affordable interest rate, a higher principle amount that comes with a student loan consolidation may take more time to repay and can cost more overall.
In the past, college graduates who have considered the consolidation of their student loan debt have had to simply sit down and run the numbers to see which route will be best for them. Obviously, the only way a graduate can decide which plan is in their best financial interest is to calculate how much they will pay in total if they consolidate their debt, factoring in interest and the repayment time frame, versus if they kept their loans separate and paid as much as they can towards those debts each month.
No matter the option student chooses, those who have benefited in the past from consolidation loans or keeping their debts separate have usually paid more than the minimum monthly requirement so that they can erase their college loan debt faster. While this is not always an option, students who may struggle to meet their monthly payments on their student loan debt have other options like income-based repayment plans or forbearance programs which may be beneficial as well.
In the end, students who run the risk of defaulting or becoming delinquent on their student loan debt need to contact their lender to talk over options for their personal situation. If a student fears missing payments or being unable to make their student loan payments, a consolidation loan may be helpful even if it may cost a little more when all is said and done. If students can erase their college debt at as small of a cost as possible then it’s obviously in their best interest but a student’s main focus should simply be to get out of student loan debt as quickly as they can without taking on more costs than they can handle.