After deciding that you wish to consolidate
student loans, you should consider pros and cons of consolidation in
detail before undertaking the effort. First step however you must take is
write down what your primary objectives and goals that you are trying to
achieve through this effort. Then consider the following factors that of
course would vary from person to person based on their personal situation
and there is no one solution fits all :
- Consolidating your loans at a fixed rate means that if rates go up,
yours will stay put. Alternatively, if there is a sharp dip in interest
rates, you will still be paying the same fixed rate. So if you think rates
will plummet, it might be best to wait things out.
- Make sure your loans can be consolidated: consolidation loans are
available for most federal loans, including FFELP loans, Guaranteed
Student Loans and Direct loans. Also consider private consolidation
options available for private student loans.
- If you are trying to lower your payments, you may do so but remember
that you might pay more overall when you consolidate because you are
extending the life of the loan .
- When doing cost benefit analysis, do consider the fact that the
interest you pay on your student loans is tax deductible. Your net
interest after taxes could come out to be be lower than new tax rate.
- Costs/fees of consolidation and net savings on interest rates may make
consolidation unattractive
Evaluate the pros and cons of consolidation with your particular loans in
mind. Calculate what your consolidated rate would be to determine if it's
worth consolidating.
- Consolidate Your Federal Loans Consolidating your federal loans means
you will pay one monthly bill and will determine a fixed rate for the life
of your loan. This rate is generally lower than that of a private
consolidation offer.
It is not recommended that borrowers consolidate federal loans into a
private loan because you will lose important privileges to defer, apply for
a forbearance, or qualify for
loan forgiveness under government programs.
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