College degrees are a double-edged sword for most students. They’re something that you can’t afford to not have, but often it’s difficult to afford them at all.
Students being in debt has become an accepted part of life. Many students see no issue with graduating with five or six figures of debt, but the true cost of loans can go far beyond money.
Living in debt
Young adults aren’t meeting major milestones in life because they simply can’t afford them. People are putting off getting married, moving out, and buying homes until they can afford to.
Having major student loan debt can also potentially affect people’s careers.
The job market is very competitive, and certain industries are very difficult to get into. In some cases, you’ll be expected to do entry level work for years until you can move ahead in your career. Some will end up taking jobs so they can pay the bills regardless of if it’s related to what they studied.
When you couple that with the fact that wage growth has stagnated for the average young adult, people are finding themselves in a very tricky situation.
A simple solution
There are a variety of programs designed to help students in debt. If you’re struggling with being in debt, there is a way for you to lessen your burden.
Some students are considering consolidating their loans. Loan consolidation involves combining several loans into one big loan.
If you have multiple loans, this could be the best solution for you. It can make paying them off much easier and less confusing. Consolidating student loans comes with a considerable amount of other benefits.
Release a cosigner
Did you have a family member co-sign for your loans when you originally took them out?
You may have needed them when you were younger, but now that you’re more established financially you don’t want them to be connected to your finances anymore.
If you consolidate your loan some banks will give you the option to release your cosigner. This can be beneficial for them if they want to improve their credit and look more appealing to auto and home loan lenders.
Have one simple payment
If you have multiple loans with different companies it can be difficult to keep track of payments.
You could accidently miss a payment and be penalized. You’re also earning a considerable amount of interest on each individual loan you have.
Consolidating your loan gives you one payment to have to worry about. You won’t have to memorize multiple payment dates or login information for payment portals.
Lower monthly payments
It can be hard to get ahead financially when all of your extra income is going towards your loans. If you choose to consolidate your student loans, you could have a lower monthly payment rate.
If you choose to extend the repayment term, you can pay less each month. This would be ideal for people that need to time to build their savings or put money towards different things.
Lower interest rates
High interest rates can make paying off a loan difficult. If you choose to consolidate loans, you could see your interest rate drop.
If you took your loan out years ago, interest rates could have drastically changed. Your credit score may have also improved which could lower your rate. Getting a fairer rate can make repayment much easier
If you hate being in debt, a lower interest rate would be to your advantage. Getting a fairer rate can make repayment much easier.
After reading all of the benefits of consolidation you may be wondering why every student that’s in debt tried to consolidate their loans sooner.
Although there are a lot of benefits, student loan consolidation isn’t right for everyone. In fact, there are some reasons why you shouldn’t consider consolidating.
You’re close to paying off your loans
If you’re close to paying off your loans and don’t feel like you’re under any financial strain, consolidation may not be right for you.
The process may be more of a hassle for you than a help. Remember, consolidation has the potential to change every aspect of your loans.
Your interest rates, repayment time, and monthly payments could change and may complicate things.
If you’re almost done paying things off and don’t have a problem with your current payment plan, stay the course and don’t change anything.
You’re concerned about the lifetime cost
Student loan consolidation can help people financially in the short term, but sometimes it can cost you in the long run.
If your goal is to lower monthly payments, you could extend your repayment terms from 10 years to 15 or 20 years. It puts extra money in your pocket in the meantime, but as time goes on you could end up paying a lot in interest.
If your main concern is to pay off your loans as quickly as possible, then consolidation may not be best for you.
You could be ineligible for other solutions
Loan consolidation isn’t the only solution for students in debt. You could choose to defer payments for a period of time so you can get your finances in order. There are also grace periods and income-based repayment plans.
If your choose to consolidate your loans, you may no longer be eligible for other repayment options. It’s worth checking out all other avenues for changing your repayment plan before you commit to consolidation.
Student loan consolidation can be a great way for people in debt to get their finances in order and repay their loans. It can be helpful, but it isn’t for everyone.
If you want to see if loan consolidation is the best option for you, contact us for help.