Is it smart to consolidate your student loans?
Updated on November 29, 2019
Many college students are forced to take out federal student loans to finance their studies due to the high tuition fees in universities. While these loans help graduates learn a trade in school and build a future career, paying them off can be daunting.
Most graduates end up with thousands of student loan debt that take years to repay, increasing their financial burden. Over the years, the government has developed repayment options that allow students to pay off their loans with ease. You can also apply for forbearance or deferment if you’re struggling to pay off your student loans.
Alternatively, you can consolidate your student loans, which is the same as refinancing.
What is loan consolidation?
Consolidation is done by combining multiple federal student loans into one loan. Thus, you make a single monthly payment instead of several ones making your repayment process more manageable and less expensive.
The average borrower usually receives loans from federal loan programs in college each semester, and they often come from different lenders. Therefore, it isn’t unusual to find a student with up to five different lenders by the time they graduate.
Each of these lenders has their interest rates, payment amount, and due date, and keeping up with all of them can be complicated, making it easier to default. With student loan consolidation, you can combine all your loans into one with a fixed interest rate for easier repayment.
Is it right for you?
Student loan consolidation doesn’t lower the interest you pay on your student loans, but it makes you eligible for forgiveness. However, some lenders may reduce your interest rate if you make continuous payment on-time over a long period.
You can consolidate your loan through the Direct Loan Consolidation program. It is a good option for you if you want to make lower payments over an extended period. For instance, some repayment plans extend your repayment time from 10 years to 20 or 30 years.
Making timely payments on your student loans helps improve your credit score and ensures you get more out of your paycheck. Student Loanify can help you find student loan repayment options suitable for your income. Contact us today for more information.