3 Reasons to Consolidate Your Student Loans

When graduates finish school, one of the last things they may think about is whether or not to consolidate student loans. There are three main reasons why people should consider this option: it saves time, it saves money, and it reduces the monthly debt obligation. 

Saves Time

When you have several student loans, both federal and private, it can become time consuming to get a handle on each one of them individually. By consolidating the student loans into one larger loan, graduates will save time because they only have to make one payment. Having to make more than one payment will take more time and more resources in terms of envelopes, paper and postage. 

Saves Money

Having several student loans also costs more money in interest. When you consolidate all the smaller loans into one larger loan, the interest rate won’t be much higher, usually no more than a quarter of a point, than your other loans. In the long run it can save you money, reducing your payments by up to a couple hundred dollars a month. Over the span of the 10 year life of the loan, this adds up to considerable savings. The money saved can be applied to other expenses or could be used to pay the student loans off even faster. 

Reduces Monthly Debt Obligation

For some students, their loan payments can be $400 a month or more. When it is time for these students to finance a car or get a mortgage, their debt to income ratio is fairly high, and so is the monthly debt obligation. Add to this credit cards and other debt, and it may be impossible for the graduate to obtain financing for several years until the debt is reduced considerably. When the loans are consolidated, the required monthly payment goes down, so that means the graduate can afford a higher loan amount when it comes to getting a house or car. 

Helps with Deferment, Forbearance and Default Issues

When student loans are in danger of default because the student has fallen behind, or have reached default, consolidating the loans can help repair the credit damage that has been done. It resets deferment and forbearance times, so if someone is in danger of using all their time in forbearance or deferment, this may be a good move.

With these main benefits of consolidating student loans, it is most certainly something all students should try to do. Student loans may be consolidated once after their initial consolidation.

There are several institutions that specialize in helping students consolidate their loans. Speak to a few different professionals to see who can provide the best deal before beginning the process. For best results, stick to the payment schedule and arrangements after the consolidation as much as possible.

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