Consolidating Students Loans After Graduation–Pros And Cons Of Private Loans And Federal Consolidation Plans For New Graduates

When it comes to dealing with student loan debt after graduation, many students who have only been out of school for a few months may be wondering what options they have when it comes to affordable payments on their student loan debts, particularly when multiple loans were used throughout their academic career. While there are not many changes which may have been seen here in July in the area of student loan interest rates, when it comes to consolidating debt, options like federal student loan consolidation plans often have one of the lowest rates associated with this particular type of loan, but there also are private student loan consolidation options to consider as well.  It will depend on the situation but in either case a student may end up seeing an interest rate of anywhere between 4% to 7% or higher, so careful attention is needed when looking at these loans.

Yet, when it comes to using private loans to consolidate student loan debts, there are some advantages for this particular route, but of course federal student loans and consolidation plans also offer students the opportunity to find affordable payments, interest rates, and the potential for forgiveness as well. However, as it has been previously mentioned, student loans from private lenders are attempting to compete with these federal loans in terms of offering benefits or rewards for those who stay current on their payments with options like having a percentage of a student’s debt discharged after a set period of time.

This will depend on what lender a graduate uses as to what options are available, but many advisers often caution students against using private student loans or consolidations due to the fact that they may not be as advantageous for a graduate. As an example, federal student loans, once again, can offer these forgiveness opportunities for those who are in the public service sector, but it may also bring about lower fixed interest rates, while a private loan may also offer a competitive rate but it may be variable and could change at a later time.

The problem that students may encounter is that if a mixture of federal and private student loans were used during school, a federal student loan consolidation option will not group in those private loans, which may necessitate that a graduate either consolidate their loans with a private lender, review whether consolidation is right for them, or if only one private loan has been used, a student may be able to consolidate federal loans together while leaving their private loan separate.

What students must remember is that private loans usually do not offer the repayment assistance that a federal loan can, in terms of help that may be available if financial distress arises. Not only should a graduate compare the benefits and cost savings potential of consolidation as it applies to their particular student loan situation, but if a student feels private loans may be helpful, they need to make sure that the terms are clearly outlined so they will know what rate they will receive, what options may be available for forgiveness, if there are any, and the student must also be aware that if employment difficulties arise that lead to the inability to pay these private student loan consolidation obligations, some private loans may simply have few options available to help students avoid missed payments or defaulting.