Why Should I Consolidate My Student Loans?

A lot of students with debt after graduating ask the same question: Why should I consolidate my student loans? There are a number of answers to this question, but let's start by defining student loans and the concept of loan consolidation.

Student loans are an important source of financial aid for students who need assistance paying for their college education.

Unfortunately, a lot of people end up leaving college with burdensome debts. This debt often consists of multiple loans from different lenders.

This means you have to deal with a bunch of different repayment plans that and policies each month. It can be very confusing and expensive this way. The solution is loan consolidation.

When I consolidate my student loans, it means that I group all my outstanding loans into one single debt with just one lender and one repayment plan.

When you consolidate your student loans, the balances of your existing loans are paid off by the consolidation agency.

Then the balance rolls over to this single institution. From there, you can focus on your debt in a more manageable setup.

Loan consolidation offers many benefits. You can lock in a fixed interest rate for the term of your loan. These rates are usually lower than what you would have been paying, and this can save you a lot of money over time.

You could maybe even save thousands when all is said and done.

Why else would I want to consolidate my student loans? One more reason is that it will lower your monthly payment amounts. You can extend the term of repayment so that you can have enough money to take care of other expenses on a monthly basis.

Just watch out for the interest that will build up over time if you do this.

How I save when I consolidate my student loans will depend on what interest rate I have and whether I decide to get an extension for my repayment plan.

Generally, consolidating student loans can reduce monthly payments by up to 54 percent. Of course, that means you are extending your repayment plan and building up more fees in terms of interest.

However, you can always pay extra each month and knock off your debt early. There aren't penalties for this, and it is the best way to avoid spending more for a longer period of time. If you can manage to make larger payments, do so.

It will cut down on the total expenditures in the long run. There is a lot more information on this subject, so check around for more resources.