Student Loan Consolidation
Student loan consolidation is a repayment tool that bundles all your school loans into one loan. So instead of having to pay off two or three loans to different loan providers you can lump them and pay back one provider. For example, you can put your Stafford, PLUS loans, and your federal perkins loans into one single debt.
But is it worth it?
Well, with a student loan consolidation you get reduced monthly payments.
Unlike the other loans, consolidation loans have a fixed interest rate for the life of the loan. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated and capped at 8.25%.
But consolidation loans have longer terms than other loans and you can choose to pay your loan back over 10 to 30 years. (If we do the math that means, you may still be paying off your college education when you’re in the 50s. And by then you are bound to have a mortgage too!)
Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than what you would pay with other loans.
Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan and you have to consolidate during your grace period to avoid an interest rate increase of 0.60%. If you wait until your grace period ends, your interest rate will automatically be 0.60% higher.
So you have to figure out if loan consolidation works for your needs. If you want to pay less each month but extend payments over a longer period of time then, go for it. If you don’t want to pay more in the long run and have debt hanging over your head for decades, then the student loan consolidation program might not be the way to go.
Either way, it looks like there’s a price to pay for a good college education.
This entry was posted on Friday, June 27th, 2008 at 12:54 pm and is filed under College Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
