When you graduate from college and have to take a hard look at the debt accrued over your years as a college student, you might feel like it is a frightening prospect. This is especially true if you have struggled to find a job in a failing economy and have reached the end of any forbearance or deferment periods. At this time, you might be wondering how you are going to make your student loan payments, and whether student loan consolidation is right for you.

What is Student Loan Consolidation?

Student loan consolidation involves finding a lender who will combine all of your student loans into one lump sum. This makes it so instead of paying several different lenders monthly payments, you will only make one payment. The lender will then disburse your payment to all of the outstanding student loans. This makes it much more simple to make your payments, as you will only be making one payment a month instead of several.

Student Loan Consolidation

Student Loan Consolidation

How Can Student Loan Consolidation Benefit Me?

Although the consolidation of student loans is not the right for every college graduate, there are a few important reasons why it should be considered.

  • Having one monthly payment instead of multiple ones makes it easier to keep track of loan payments and minimizes the risk of forgetting to make a payment.
  • Consolidated student loans, especially Federal loans, often extend any forbearance or deferment periods. This gives you more time to find work and get on your feet after your college graduation.
  • There are many different options for repayment of your consolidated student loans, which makes it much easier for you to begin to make your payments. There are income-contingent and income-based repayment options, which calculate your payments based on your resources. As your financial status changes, so does the payment amount.
  • There are no additional costs or fees associated with consolidating your Federal loans.
  • You can make changes to your payment plan at any time.

Can Student Loan Consolidation Negatively Affect Me?

Although the most negative effect of student loans come from simply not paying them, there are a couple of drawbacks to consolidation of student loans.

  • Although monthly payments may be lower, the lifetime of the loans in extended. This increases the overall amount you will pay on your loan over time. In some cases, however, it is worth it, especially if you are having a temporary financial difficulty.
  • If you consolidate your student loans while you are still in college, you will automatically lose the standard grace period applied to Federal student loans. This could be problematic if you find it more difficult to find work than you anticipated.

Can I Consolidate All of my Student Loans?

There are myriad types of student loans that can be consolidated into one. These include, but are not limited to, Stafford loans (both subsidized and not), Direct Loans, Perkins Loans, and PLUS loans. There are some types of loans that are ineligible for consolidation, so make sure you do your research before assuming that loan consolidation is the best move for you.

However you choose to make your student loan payments, the important thing is that you do repay them. The negative effects of defaulting on your loans can impact your future in many ways.