College Student Loan Consolidation

With college tuition on the rise, it is commonplace for students and parents alike to seek several methods to help pay for tuition costs. Student loans, scholarships, grants and work-study are the most common methods of tuition payment. Student loans are one of the most popular sources of financial aid, but can often become a burden to pay, especially in the case of multiple loans.

For that reason, a common solution for relief from the stress of high payments is college student loan consolidation. The decision to consolidate current student loans into a single loan should not be made lightly as there are disadvantages to doing so. Obviously, the benefits of loan consolidation are highly touted by loan institutions, whether it is Federal or private.

Student loans can become quite a financial burden under many circumstances, affecting people at all levels of income. When a student closes in on graduation, there may be multiple loans to pay. This is when students should consider college student loan consolidation.

College Student Loan Consolidation - How it works

Common questions surrounding college student loan consolidation include:

What exactly is student loan consolidation

How do I find a student loan consolidation lender?

What types of student loan consolidation plans are available?

How do I know if a consolidation loan is right for me?

Student Loan Debt Consolidation is the process whereby you secure a new loan, consolidating all your existing student loans into a single loan. The new loan may be a Federal loan or private loan, which we will discuss later. Consolidation refers to the process where the lender pays off your existing loans and gives you a new loan with a new interest rate and new payment amount and terms.

The goal is to obtain this new college student consolidation loan with a lower monthly payment and lower interest rate. Repayment terms are commonly 10 to 30 years, which results in the lower monthly payments.

College Student Loan Consolidation - General Assessment

Before making a decision to apply for a College student consolidation loan be aware of the following facts:
A consolidation loan means:

Paying more money for your college education

Paying for a longer period of time for your college education

College Student Loan Consolidation - Research

If you decide that college student loan consolidation is for you, start by conducting extensive research. Begin with federal student loan consolidation programs such as Federal Family Education Loan Program and Direct Loan Consolidation. They provide fixed interest rates capped at 8.25%. There are also other free resources to help you make a decision. It is important to shop around and gather as much information as possible in order to make the best decision.

College Student Loan Consolidation - Programs

The most popular student loan is the Stafford Loan, which both subsidized and unsubsidized versions. There are also PLUS Loan consolidations and a Perkins Loan which can be consolidated. Options exist for undergraduate consolidation, graduate refinancing and alumni consolidation loans.

College Student Loan Consolidation - Pros and Cons

It is important to consider both the pros and cons before applying for a student consolidation loan.
The pros are highly touted by lenders:
Pros include:

The reduction of monthly payment amount

Lower interest rate, which may save you money over time

Organization of loans - make only one monthly payment

Possible Cons include:

Possibly paying more money over the life of the loan

Most likely paying on the loan for a longer term - 10 to 30 years

Consider the loan final with few options to consolidate this loan later

College Student Loan Consolidation - Federal vs Private

Federal loans are generally more attractive than private for a few reasons. Federal loans have lower and fixed interest rates and other benefits such as grace periods. Private loans usually have higher interest rates, no grace periods. When consolidating, keep the types of loans separate in order to retain the benefits of the Federal loans.

In the end, I recommend paying off your current loans by doing whatever it takes, within reason, to do so. Getting a job or changing spending habits may enable you to pay off the current loans. Debt is a burden and your goal should be to rid yourself of all debt.

That being said, in certain situations, College student loan consolidation may make sense for you. But do your homework first so you are equipped to make the best decision for your long-term financial future.