The biggest mistake you can make in your first year of college is not learning how to manage your student loan properly. It’s easy to get overwhelmed by the number of options and repayment plans out there, but they are here to cut through all of that and help you find what works best for you. This article will cover everything from basic consolidation fundamentals to more advanced strategies for making sure your loans are paid off on time.
What Is Student Loan Consolidation?
Student loan consolidation is a way to combine multiple student loans into one. It can help lower your monthly payment and make it easier to manage, but it doesn’t change the interest rate on your loans or change their term. You can read on the student loan help center for more info on a student loan. As per SoFi, “Get started by reading some introductory write ups that can help point you in the right direction.”
The Mechanics of Consolidation
Student loan consolidation is when you take out one new loan to pay off all of your outstanding student loans. This will lead to lower monthly payments but not a lower total amount owed. Consolidation can also help you qualify for other benefits, like income-driven repayment plans.
When and How to Consolidate
- When to consolidate. If you have federal student loans, it’s always a good idea to consider consolidating your debt before graduation. That way, you can earn the benefits of a lower interest rate and an extended repayment plan if necessary. For example, if your loan balance is over $100,000 or if you’re having trouble making payments every month, then consolidating might reduce what you owe and help make it more manageable.
- How? Once again: check out NerdWallet’s guide to student loan consolidation for more information on how this process works. They’ve also got a useful calculator that compares different scenarios so you can see how much money (and time) could be saved by consolidating your loans now instead of later on down the line–which may make all the difference when deciding whether or not this is right for someone in their position!
Benefits of Consolidating Student Loans
Student loan consolidation is the process of combining multiple student loans into one single loan. This can help you lower your monthly payments and accelerate your repayment, as well as qualify for some federal income-driven repayment plans. Consolidating also provides flexibility in choosing a repayment plan that best fits your life circumstances.
Cons of Consolidating Your Student Loans
The main reason why student loan consolidation is only for some is that you lose access to federal loan benefits like income-driven repayment plans. You can consolidate multiple private student loans into one loan, but your interest rate will stay the same.
If you have several different federal loans with different rates, consolidating them into one new loan could mean a higher interest rate and more money paid overall than if you had kept them separate and consolidated later when your situation calls for it.
A consolidation is a good option if you have more than one loan and want to simplify your payment process. However, if you have federal student loans, it may also help lower your interest rate and save money on interest over time (though there are no guarantees).
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