Are you thinking about consolidating your student loans but aren’t sure how to go about it? Here, we’ll help you understand your options and give you details on the best choices for you.
Student loan consolidation is a process that involves taking out a new loan to help pay off your existing student loans. Rather than having several loans and loan payment plans, student loan consolidation merges everything into one loan. Using this, you can combine all your private student loans and all your federal student loans, simplifying the payment process.
How much you’ll be allowed to borrow will depend on your college costs per year. For instance, if you take a four-year course, it’s likely that you will incur four loans — and this amount can increase if you choose to get a private loan for additional funding. Consolidating all your loans can simplify your life; however, you also need to be careful as there may be conditions that can cause you to lose some benefits from certain loans you currently have.
In most cases, a student is considered eligible for loan consolidation if they are:
While there’s no need for you to meet a minimum to combine your debts within the federal Direct Consolidation Loan program, some loan companies and private lenders may demand a minimum balance on your loans. Furthermore, you can’t consolidate federal student loans with private student loans. Lastly, you’re only allowed to consolidate loans under your name, which means that you can’t consolidate your loans with that of a spouse or loans under your parents’ names that they took to finance your education.
Keep in mind that some advantages apply only to private loans or only to federal loans. Additionally, you can choose to keep a loan separate if it has great borrower benefits.
You can get an alternate repayment plan, which makes you eligible for a federal loan that will make it easier for you to repay your loans. There are two types of this plan, which are:
These are some cons that come with consolidating student loans, which apply to all kinds of loans:
Simply put, student loan consolidation is a great way to combine different loans into a single loan, which are all merged into one monthly bill. It may sound like a good idea off the bat, but it’s best to consider the conditions of your current loans and what consolidating them might mean for you. Because, while this process may have very attractive offerings, it also comes with a few but considerable disadvantages. Make sure to take into account all the details outlined above before deciding to consolidate your student loans.