Student loans often come in a variety of types and amounts, but one common factor is that college graduates who exit school with college loan debt often look for ways to make their student loan obligation more affordable. While federal student loans and private student loans differ in the amount of interest, repayment options, and overall costs that may be incurred, many college graduates often turn to consolidation loans for help.
While certain types of loans cannot be consolidated and for anyone who may be thinking of using a consolidation loan the types of loans that a student may have need to be considered. Typically, private loans cannot be consolidated into a federal student loan consolidation plan and even certain federal student loans will not consolidate together.
Yet, students who have college loans that will consolidate often believe that a debt consolidation plan will be in their best interest. Oftentimes, low interest rates can be provided on a student loan consolidation plan but they may not always be in a graduate’s best interest.
Even with a low interest rate a consolidation loan can be quite costly. Graduates who are considering a consolidation loan must look at the total principal amount that will be rolled into a consolidation loan, the interest rate they will pay, and the repayment time frame they must work with. Students who only meet minimum requirements on their consolidation payment can suffer more costs due to interest rates and time.
There are those who have benefited from student loan consolidation plans by paying more than is required on their monthly payment, but again, there are cases where a student may be able to erase their college loans faster and at less cost overall by keeping them separate. Each college graduate must look at their personal student loan situation and then weigh the pros and cons of the consolidation loan, as it pertains to their debt.
Yet, if a graduate runs the risk of missing payments or defaulting on their student loan debt, many believe that paying more money overall may be more beneficial than doing damage to one’s credit score because of the inability to meet monthly payments. While consolidation loans can be helpful since they only require one monthly payment, there are other options like income-based repayment plans or forbearance options which may also allow a college graduate to get their finances in order before they begin repaying their student loans.