How to Consolidate School Loans
Consolidating school loans means that one lender would actually group together all of your various outstanding loans in one account at a new fixed interest rate. The thing that most people like about the consolidation of their loans together is the fact that they only have to worry about paying one total amount each month and not 4 or 5 bills. Paying more than 1 bill at different times in a month can be quite stressful to keep up with not to mention that people tend to forget about the payment schedules too. This holds true especially for students who have other things in their minds like the school exams or getting a job. So how does one consolidate school loans? Well, below are some very helpful steps.
Of course the first thing you should ask is “What are the Pros and Cons?” In this case, the Pros and Cons of consolidating your school loans depend upon your financial situation. So do consider the fact that when you consolidate school loans, your will be paying a fixed rate. This is good if the rates go up because then yours would remain the same but if the rates suddenly go down and you’re still paying the same fixed rate, you might find yourself paying a higher rate than what the usual is. So study the rise and fall of the rates if you think that they’ll still be in your favor by the time you finish paying the loan then go for it.
Before you can actually consolidate school loans, make sure that they can be consolidated. Consolidation is available for most of the federal loans including the FFELP (Stafford, Plus and SLS loans), Perkins, FISL, Health professional student loans, HEAL, NSL, Direct loans as well as Guaranteed loans. Also available for people who private student loans is the private consolidation options. If you do choose to go through with consolidating your school loans, take note of the fact that you might be paying more when you bring it to a total. This is because when you opt to consolidate, you are extending the life of your loan.
So how much can you save when you decide to consolidate school loans? Well, that depends on the interest that you’ll get as well as whether you choose to have an extension on your payment plan or not. There are some companies that would tell you that you can reduce the monthly payments you make by about 54%. However, the only way you can actually reduce your monthly payments by that much is to extend you existing repayment plan. Typically, you are given about 10 years to repay a student loan but depending on the total amount of the loans that you are getting consolidated you can extend the 10 years even further. Thus lengthening the time you have to pay off your entire debt but you’ll end up paying more in terms of interest. Do take note that there are no penalties for pre-payments so if you come by some extra money, you can opt to pay off your debt earlier than scheduled.