Student loan consolidation can be a useful tool in your arsenal to help make student loan debt more manageable. Student loan consolidation will allow you to (essentially) roll your existing student loans into one consolidation loan, giving you only one student loan payment per month (sometimes at lower monthly cost). Now before you “jump for joy”, understand that the reason you get a lower monthly payment with loan consolidation is because you extend the repayment term of your student loans, thus you will likely pay more over the lifetime of the loan. You can consolidate both private and federal student loans, however you must never consolidate your federal student loans into a private consolidation loan, you will lose all the benefits that come with federal student loans if you do this. Consolidate your private student loans into a private consolidation loan, and your federal student loans into a federal consolidation loan.
Tips on Student Loan Consolidation and Rates
In order to find the best deal and rates for a consolidation loan, you are going to need to look for and research a few things.
1. Look for consolidation loans which will help lock you into a single low interest rate for the lifetime of your loan.
2. Look for student consolidation loans that do NOT have loan fees or early payment penalties.
2. To help get a clear picture of your current student loan debt, start by writing down the total student loan debt amount and student loan rate for each of your student loans.
3. To get an estimate of your student loan consolidation rate, you can calculate the weighted average of your student loan debt interest rates on the student loans you are looking to consolidated.
a.) Multiply each student loan debt amount by its student loan interest rate.
b.) Add the totals together.
c.) Divide this sum by your total student loan debt amount.
d.) Round this number up to the nearest 1/8 of a percent.
4. Carefully read and understand the terms of your consolidation loan. If you are not having problems making your current student loan payments, and the interest rate on a consolidation loan is not much better then the rates you have on your current loans (fixed rate loans), consolidation may not be worth it for you.
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