Many college graduates turn to consolidation loans as a way to manage their student loans when it comes time to repay this debts. Typically, students who have multiple student loans turn to these consolidation plans as a way to better manage and afford their repayment requirements on debt after they have graduated.
However, some financial advisers warn against student loan consolidations as they can be more expensive in certain cases. While interest rates on certain types of student loan consolidation plans, like federal student consolidations, can be low, the repayment timeframe and higher principal amount associated with a consolidation loan can cause costs to rise for many graduates.
While many turn to these consolidation loans because they are fearful that meeting multiple repayments could become problematic and, if payments were missed, one’s credit score may drop, advisers suggest various ways of dealing with student loan debt which could help lower overall costs, even if consolidations are used.
Students who only have a few student loans may be better off repaying the debt separately rather than consolidating. Again, consolidation loans will cause a higher principle amount to draw interest, which can lead to higher costs when all is said and done. For graduates who may be unconcerned with this, consolidation plans may be helpful, but understandably, the majority of graduates want to minimize their amount of student loan debt repayment costs.
For college graduates who feel consolidation is the only way to manage their college loans, advisers often suggest meeting more than the minimum monthly payment requirements on their consolidation loan, as this can help erase debt faster and lower costs associated with interest over time.
Graduates may be able to talk to their lender about other financial plans which could be helpful in meeting monthly payments, but again, many of these low cost repayment plans will allow for interest to accrue and could cost more in the long run. However, in a worst-case scenario, if students must choose between a consolidation loan or missing payments on their debts, it is often advised that repayment assistance options, like consolidations, be used rather than doing damage to one’s credit score directly after college.