Managing Student Loans

Listen up, students and parents. Consolidating loans can save you a lot of money and is definitely worth doing if you have borrowed money for college education from more than one source. Who am I to be an expert on student loan consolidation? Well, as a recent college graduate, I faced a dilemma of how to be able to make monthly payments on all these outstanding student loans I had, since I have been borrowing money since my freshman year of college. After all, it can be overwhelming trying to set aside enough money for college loan repayment as well as other bills and necessities.

I spoke to an adviser at my school as a part of a mandatory financial counseling requirement all graduating students had to fulfill. The adviser strongly encouraged me to consolidate all of my loans into a one single debt. There are several advantages to doing this, my adviser explained to me. First advantage is that consolidation loans have a fixed interest rate that will never go up for the life of the loan. That is definitely a better option than having to watch your loan rates go up every year until the end of time. Second advantage is that consolidation loans have better repayment options, making your monthly payments more manageable. You are able to choose longer loan terms from ten to thirty years, depending on how much money you are able to set aside for loan payments every month. It is important to be aware that most consolidation companies have a minimum loan amount (typically $10,000), so if you are looking to consolidate a smaller amount, make sure the you negotiate it with a consolidation company.

You can qualify for a loan consolidation once you are out of college and have either entered the grace period of six to nine months before the beginning of your loan repayments or have already started making payments. The fixed interest rate, however, will be higher if you choose to consolidate your loans after your grace period comes to an end. Note that you can be denied for a consolidation loan if you are in a default on a federal student loan.

Some loans are not eligible for consolidation. These loans are typically private loans or school-based loans. If you have received a loan from a family member to help you pay for you education, you cannot consolidate that loan either. Once you have taken out a federal consolidation loan, you can add additional eligible loans within 180 days of the date that the consolidation loan was given to you.

It all comes down to this though – whether or not you decide to consolidate your loans, it is important to explore other alternatives and make a well-informed decision based on your findings. Every person’s financial situation is slightly different, so what works for the next guy may not necessarily work for you. So talk to people, seek out advice, but ultimately, make sure that you make a decision that makes the most sense to you.