Higher education is very expensive and not everyone can afford it. Everything from accommodation to tuition fees and books has to be paid for. To pursue our dreams and go to the university we always wanted to, student loans come in handy. Their rate of interest is lower than the normal rate of interest and the time for repayment is also significantly higher. We sometime take more than one student loan to help us with our finances during college. Paying the interest for different loans every month can be a daunting task and student debt consolidation loans come in handy.
A student debt consolidation loan is one in which all the smaller student loans are combined into one big loan and the student has to pay off just this every month. There is only one repayment period and one due date to make the payment. The loan’s interest is also significantly lower and you can save precious dollars every month. There are two basic types of student debt consolidation loans and they are federal student consolidation loans and private student consolidation loans.
Advantages of student debt consolidation loans:
1. The rate of interest on these loans is fixed and it has a significantly lower rate of interest than the other loans combined.
2. There is just one loan to pay off so remembering the due dates will not be difficult.
3. You can have an extended time of repayment of the loan and this can go up to 30 years.
4. As the time frame to pay off the loan increases the amount that needs to be paid off every month also reduces significantly.
5. You don’t have to pay any extra fee to consolidate these student loans.
6. The application process for this loan is also much simpler and there are no penalties for paying back early as well.
Disadvantages of the student debt consolidation loans:
1. Extended payment periods may make it seem that very little money is flowing out of your pocket but in the long run you will end up paying much more than you borrowed.
2. It is extremely important to be very careful about the amount of interest you have to pay on a consolidated loan. It can happen that the rate of interest is higher in the consolidated loan than the other individual loans. In this case taking a consolidated loan is more of a disadvantage.
3. When taking a consolidation loan, you should also consider the remaining tenure on your various loans. This is especially important when you are taking a loan for the purpose of consolidating your payments into one (rather than due to financial problems in paying back the loan). If most of your loans are nearing the tenure completion, you would not gain from consolidating such loans.
4. Consolidating the loans within the grace period will require you to pay it off immediately.
Student loans have helped millions of students pursue their dreams and become what they are today. Student debt consolidation loans help them ease the financial burden to a great extent. The pros and cons must be evaluated carefully before choosing to consolidate the student loans.