Limit Your Anxiety: Student Loan Consolidaton

by

Jimmy Chuang

Entering the workforce after graduating from a two or four year program, most students find that it can be difficult to pay back student loans in the 10 years that you are given.

Most students during this first 10 years after graduation will get married, have at least one child, have at least one child, most likely buy a house, and even get married.

With outstanding private school and federal loans, managing all of these expenses may be difficult.

One major option is to consolidate student loans, which means borrowing to combine your student loans, pay them off, by only paying one payment on one larger balance with a longer term loan. The option to consolidate student loans is open to most employed graduates or even, in some cases, to students that are still in school but are in some way working to earn an income.

It is very important to compare how the consolidation and your original loans differ based on various interest rates, and it is equally important to consider all of your options.

Advice can be given to help consider and understand both the advantages and disadvantages of consolidating your student loans. This advice can be given by a variety of people including a financial planner, consultant, or ever your personal banker. Generally the biggest advantage to consolidate student loans is that it takes the multiple payments from different lenders you may have a literally pays off these loans, leaving you with one payment to make to the consolidated loan lender. It is safe to assume that you will pay less per payment by consolidating compared to the original multiple payments.

The logical reasoning behind this is that your pay back term is expanded, therefore you pay less per month over a longer period of time. In terms of student loans, the disadvantage lies in the longer term loan which in some circumstances could take up to 30 years to repay. This means that over the life of the consolidated loan you will pay significantly more in interest, which may be a huge dollar amount if you actually make only the required payments.

You can also lower the interest amount by paying more than the minimum monthly payment. However, it is important to distinctly specify that the extra payment is strictly for the loan principal. This will rapidly cut payments off the duration of the loan, especially if you start right when the consolidated student loans are put into place.

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