Avoid Stress: Student Loan Consolidaton

By Author: Jimmy Chuang
Total Articles: 21
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For most students that graduate from a two or four year degree program and then enter into the workforce, paying back student loans within the 10 year allowable time can be a real challenge.

Most students during this first 10 years after graduation will get married, have at least one child, have at least one child, most likely buy a house, and even get married.

With outstanding private school and federal loans, managing all of these expenses may be difficult.

You can, however, combine your student loans by borrowing money, also known as consolidating, to continue paying them off then pay off the remaining single consolidated loan over a longer repayment period. The option to consolidate student loans is open to most employed graduates or even, in some cases, to students that are still in school but are in some way working to earn an income.

To consolidate student loans it is important to consider all your options and to understand how the various interest rate differences on the original and the consolidation loan will compare over the long run.

A financial planner, consultant or even your ...
... regular banker can help you understand the advantages and disadvantages to consolidate student loans. Consolidation's biggest advantage is that it takes one payment a month, rather than many, by paying off all of your loans. leaving you with one payment to make to the consolidated loan lender. It is safe to assume that you will pay less per payment by consolidating compared to the original multiple payments.

The reason that this can happen is when you consolidate student loans the time that you have to repay is significantly expanded, meaning that you have to pay less each month. In terms of student loans, the disadvantage lies in the longer term loan which in some circumstances could take up to 30 years to repay. By making the minimum monthly payment on a consolidated loan means you pay much more in interest in the long run, which could be a substantial amount depending on the interest rate and monetary size of the loan.

You can also lower the interest amount by paying more than the minimum monthly payment.  However, it is important to distinctly specify that the extra payment is strictly for the loan principal. This will rapidly cut payments off the duration of the loan, especially if you start right when the consolidated student loans are put into place.
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