Student Loan Consolidation

So what are the key benefits when you consolidate student loans? Are they reason enough to apply for consolidation? See for yourself.

• Single monthly payments. When you consolidate your student loans you replace the multiple payments you make on your various loans with a single monthly payment which is made to your already consolidated loan. Basically, it simplifies the whole process of payment.

• There are alternative repayment plans. Consolidation would provide you with the access to different repayment plans such as the extended repayment, graduated repayment and the income contingent repayment. Although the same plans are also available to unconsolidated loans, the term of extended repayment plans depends upon the balance of the loan, which is considerably higher for a consolidated loan. These alternate repayment plans can also decrease the size of your monthly payments by up to 50% making these payments more affordable and manageable.

• Reduced rates on some PLUS loans. To better maximize this reduction in the interest rate, the PLUS loan should also be consolidated.

• Consolidation would reset the 3 year clock on deferments, certain ones, as well as forbearances. Basically a consolidation loan is a new loan thus it has its own new set of deferments and forbearances.

• The ability to switch lenders for better discounts on your loans. If you consolidate your student loans you would then be allowed to switch from one lender to the next. You can also opt to switch from FFEL to a Direct loan and vice versa. If you patiently look around, you would be able to avail of better discounts on your loan interest rates as well as better rebates on your fees.

But with the good eventually comes the bad and Consolidated Student Loans are no exceptions. Here are now some flaws that you might want to take a peek at before you make that decision.

• Remember that you are only allowed to consolidate once. The current law only allows borrowers to consolidate once. So if you were to include a previously made consolidation loan to your new one, you would be adding other loans to the consolidated one which makes your ability to switch from one lender to another extremely limited. Also take note of the fact that even if you are able to consolidate a previously made consolidation loan to your new one, the interest rates on your consolidation loan is fixed and cannot be changed.

• Inferior Loan Discounts. Lenders who offer borrower’s benefits for when they make electronic transfers as well as when they always pay on time is likely to offer unappealing benefits when it comes to consolidation loans. However this might soon change as we are expecting to see increased competition among consolidators concerning price. They might start offering better and much improved discounts so that they could get borrowers to switch lenders.

So there it is, some of the key advantages and disadvantages of consolidating student loans. I recommend that you do some research as well as asking around for the best companies to go to for a consolidation on your student loan. Your research would surely pay off if you find one amongst the many companies that offer you the best price as well as the most suitable to your current financial situation.