College Loan Debt Consolidation Benefits

College loan debt consolidation can be a helpful student loan debt management solution after you have earned your college diploma and begun taking the first steps in your career.  Often new graduates are earning just a low, entry-level salary while carrying the burden of paying off more than one college loan borrowed from the government. You might be carrying a number of private student loans as well. 

College Loan Debt Consolidation Benefits

One of the challenges of paying off more than one student loan is multiple payments each month. It's not uncommon for a borrower to have to keep track of eight to ten loan repayments a month. College loan debt consolidation simplifies the process. You'll only need to deal with a single lender. In addition, you will have improved your credit score because the consolidation lender will pay off your existing loans, while you now make a single, more budget-friendly payment each month. College loan debt consolidation can ease the strain on your budget, making timely repayment easier. 

Many college loan debt consolidations offer the option for automated repayment, so missing a payment is never a worry.

Multiple loans also mean multiple interest rates. Often college loan interest rates are variable, so that when the interest rates go up, so do your monthly loan payments. Complicating the repayment process further is that each of your college loans may carry a slightly different rate of interest. College loan debt consolidation often comes with the opportunity to lock in a single low interest rate, which will save you money over the term of the loan.

Some loan consolidation lenders will also offer rate reductions if you choose automatic payments. It might also be worthwhile for you to shop around for a college loan debt consolidation agreement that will reduce your interest rate after a certain number of on-time repayments. The interest rate reduction in both circumstances is typically about a quarter of a percent.

Consolidating Your Private Student Loans

If you are carrying private student loans, you won't be able to consolidate them in the same consolidation agreement as your government loans, but if you have a number of them, you should be able to find a private consolidation lender who will help you.

Whether you are consolidating your college loans from the government or your private student loans, or both, consolidation typically involves extending the term of the loan. But you should still save in total interest using the discounted rates you receive for consolidation. With college loan debt consolidation, it's also easier to keep track of how much you've paid each year in interest, which is an advantage if you are eligible for the student loan interest tax deduction.

Unlike with many conventional loans, if you settle your college loan debt consolidation obligation early, you will incur no prepayment penalty. Furthermore, if you need to extend your repayment timeline, you have the power to do so.

 


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