Pros and cons of consolidating student loans
If you consolidate your loans now, your new rate will be based on a weighted average of all your loans' interest rates.
So, for a simplified example, if you have two loans, one for ,000 at 4% interest and one for ,000 at 6%, your consolidated loan will have a ,000 balance and a 4.7% interest rate.
Your grace period on some loans could end prematurely, or you may end up consolidating at the wrong time – too early or too late.
Not all student loan debts can be consolidated, although most federal loans can.
You may end up paying more in total interest after you consolidate your student loan debts.
If you currently have multiple student loans, you could benefit from a consolidation loan on your student debt.But, as Mark Kantrowitz warns on USA TODAY, “variable rates have nowhere to go but up.” If you sign up for that low, low rate now, you risk committing yourself to rising rates for years to come. Typical student loan repayment terms range from 5 to 20 years.By extending the repayment term, you can significantly reduce the amount of money you’re required to pay each month.Consolidating those loans into a single new one can simplify your payments, especially if your loans are with different loan servicers, the companies that oversee your payments.
It can also be a way to get into repayment plans you otherwise wouldn't be eligible for.1. One of the myths of consolidation is that it makes your debt less expensive by lowering your interest rate.Much more affordable for the recent graduate trying to make ends meet.Not only do you have a smaller payment, but your interest rate is locked in.At a time when the economy is still in recovery and finding a well-paying job is easier said than done, the results of this debt could be devastating.