College tuition has increased at rates well above inflation in the last few decades in order to support the cost of highly-trained professors, university research, facilities, activities, equipment and the like. College has gotten so expensive that most students can’t afford to pay for it upfront any more, and according to a recent NPSAS study found that 2 out of every 3 students ended up with student loans after college. If you are one of those students, you should consider the option to consolidate student loans. Student loan consolidation is a good thing to do for a number of reasons, let’s look at why it’s such a good idea.
The average college student ends up with $19,202 in federal student loan debt after graduation. Usually this money is broken up into several different small loans each semester, with whatever the variable interest rate Congress happens to decide. Right now it’s at 6.8%, which is a lot higher than it’s been recently, but the new democratically controlled congress is working to lower it, but there’s no guarantee either way. If you do consolidate student loans now, your rate is guaranteed to stay the same and there will be no surprises.
Usually there’s a 6 month grace period before you have to begin repaying your federal student loans, and usually you’ll get a discount if you consolidate student loans within this time period. Often time this consolidation discount can give you from .5% to 1.0% off your rate, which is a great deal.
You can also say money when you consolidate student loans by enrolling in a “direct debit” payment system. Basically, the money is taken out of your checking account through means of EFT transfers rather than you writing a check every month. There’s evidence which supports that people who pay with EFT are much more likely to pay than those who just use checks.
With a lot of refinancing companies, you can get some money back after you make your payments on time for a certain period after you consolidate student loans. In my fianc’s case, she was able to get 3% of her loan balance back after paying 9 payments on time through College Loan Corporation.
With consolidation loans, you get to make one easier payment rather than writing checks to multiple banks, which makes student loans a lot easier to manage. Usually the application processes aren’t too bad either, but saving on the interest rate is main reason to consolidate your student loans.
There’s a lot of different companies that will allow you to consolidate student loans, you’ll want to compare at least 3 different companies to make sure you are getting the best deal on your student loan consolidation loan. You’ll want to consider repayment terms, fees, interest rates, and any other special features that come with refinancing with a certain company. It’s definitely a worthwhile thing to do after you graduate college, so be sure to do so.