College students who graduated in May with student loan debt will typically have a grace period before they must begin repaying these obligations, but when there are multiple student loans in place, many students often feel that consolidating will be the best route for not only affordability but paying back student loan debt without incurring potentially higher costs associated with multiple interest rates. Yet, before students begin repaying these debts, many financial aid counselors and financial advisers in general want students to look over their student loan situation before making any decisions related to consolidation, as this type of student loan repayment plan does have both benefits and drawbacks.
Understandably, students see a consolidation loan as a good option, particularly when federal loans are the only types of debt that a student has, because these consolidation plans come with a fixed interest rate, and low monthly payments in many cases. However, even if a student is in a position where federal loan debts are quite costly, they can usually opt for a consolidation loan which works alongside programs like an income-based repayment plan, and this can bring more affordability to the student loan repayment process for those facing federal loan debt.
While these low advertised rates on federal consolidation loans do attract many students, there are some cases where students may be better off if they simply keep their loans separate due to the fact that a principal on one loan or more could be easier to pay off than one giant principal associated with a student loan debt consolidation plan. Obviously, this will differ from one student to another, but for those who are going to begin repaying their debts in late 2011 or early 2012, this option is worth exploring as some men and women may be able to budget at the present time and pay down the principal amount on smaller student loans, which will obviously put them on a fast-track to college loan debt relief.
The amount of student loan debt that many graduates are shouldering presently is quite expensive, but students who are smart about their repayment options, explore the benefits of paying loans off separately versus a consolidation loan, and properly budget during their grace period may find that it is less of a strain on their finances to pay down these debts than they may have previously thought.
There are some cases where students cannot meet minimum payments on their multiple student loans, so in these instances a consolidation plan can help reduce the minimum monthly amount that is required of them, and help avoid missed payments and damage to their credit, but this is not always the case. Some students have been able to save money, when they get a job after graduation, and have applied payments on certain loans in a way that have been more cost-efficient than if they had simply consolidated.
Also, there are those students who have been in a position where they can meet minimum payments on multiple loans but focus as much money as they can on one of the loans with either the lowest principal amount or the highest interest rate, and subsequently pay off these loans with repayment strategies similar to this one, but again, reviewing one’s student loan debt situation will be vital before the proper strategy can be implemented. Simply put, consolidation loan are helpful for some graduates but they are not in everyone’s best interests, so students who are offered a consolidation loan on their federal debt need to make sure that if it is the route they take it will be the best and most affordable option for them.