6 Reasons Why You Should Consider Student Loan Consolidation

Student loans are a wonderful way to help get yourself through college. The only problem they pose immediately is that you may have taken multiple loans with multiple interest rates to cover the numerous holes in your income and the cost of college. It's rare that a single Federal loan will cover the entirety of the cost of college and so supplemental loans such as Perkins loans or Private Loans are taken to fill the holes. Take the average chiropractic student loan debt. Consolidation or no, it's a massive sum of money. During the four years you spend in college, the interest rates on those loans almost assuredly will change as well. For those reasons, it's a great idea to consider consolidation as you near graduation. For those getting to that time in their life, here are 6 reasons why you should consider student loan consolidation:

1. Lower Payments

- Because your payment term is often lengthened through consolidation, your monthly payments go down as well. A consolidation loan is essentially a brand new loan that combines all of your existing student loans, and for that reason, you can sometimes lower your payments by as much as half. If you want to pay back your loaner quicker as well, larger payments are considered acceptable. Keep in mind though that for those who opt to take advantage of the lower rates upon graduation, you will need to pay larger amounts in a few years to offset the interest charges. Through companies like ACS or Great Lakes, student loan consolidation looks like a sure fire money saver, but you still have to pay that back eventually.

2. Fixing Your Rates

- When you consolidate your student loans into a single loan, you tack onto it a fixed interest rate. Unconsolidated federal loans are dictated by variable interest rates, changing every July 1st based on the US Treasury bill. Especially if it looks as though the interest rates will rise soon, lock in your rates with a consolidated loan. The important thing to remember is that if you're graduating in May or June, you only have a month or two to research the interest rates and start the consolidation process.

3. Payment Plan Customization

- Payment plans are often complicated with student loans, especially when you have multiple loans to repay. With a consolidation loan, your options increase because you're only making a single payment. Often, you're given the option to Graduate payments over time, only paying interest during the first few years so as to get on your feet and get a good paying job. If you have a substantial loan from years in graduate school, you can extend your repayment schedule up to 30 years as well to manage the amount of your loan. It's a matter of what you can afford and how you want to handle it.

4. Single Payment

- For many people this is a very important part of the puzzle. Instead of having five different payments that you might forget at some point or another, you can combine all of your loans and write a single check each month. It's not only easier, but it's more organized and the last thing you want to risk is forgetting to pay one of your loans at any point in time. Forget the handful of loan paperwork showing up in the mailbox every month.

5. Deferment and Subsidy benefits

- You don't lose any of these benefits when you consolidate, because the new loan is essentially the same loan with new terms, backed by the same lender, the federal government. For that reason, any deferment or forbearance benefits that you've accrued will remain intact with a new consolidation loan. These types of benefits can be substantial, especially with bigger loans. For those that need to look into private consolidation loans, remember that there is a bit of a difference in the terms offered by private financial institutes. Check with Great Lakes; student loan consolidation through them or other well established private lenders like ACS is often a good way to go.

6. Your Credit

- Believe it or not, consolidating your loans looks good on your credit report. Having numerous open loan accounts with limited payment history is bad for your credit. Through companies like ACS, student loan consolidation will actually improve your credit. By combining them into a single account and making a single payment, you pay off all of those open accounts. It looks much better to future creditors to have a single open account than to have five. Additionally, paying off such a large sum of money always looks good on your credit report. If you're looking to buy a house or a car in the next ten years, having a single large loan on your account in good standing rather than five is a good idea. It might come back to bite you if you don't.

When to Consolidate - Keep a close eye on the interest rates and your future loan needs. Every year the Treasury bill changes and every year there's a chance your future payments will be increased through higher interest rates. However, if you notice that the rates will be going down one year, you should wait to consolidate until the rates are about to go up again. It's a matter of watching the market and knowing when consolidation will be the best option for you. The best time to consolidate your loans is right after graduation. You're only given six months before your payments start and if you consolidate in that time, you get a tidy little discount on your interest rate for the life of your loan.

Loan consolidation is a vital task that most college graduates tend to overlook in the early days of summer. Because rates change in the middle of summer and the grace period is over before you realize it, student loan consolidation is actually a task that should be started while still in school, doing the research and gathering the necessary paperwork early. You'll likely receive your share of paperwork in the mail as a college senior, but make sure you talk to your financial aid counselors and your parents about your options. It's the responsible way to approach the process.

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