Consolidate College Loans: Its Pros and Cons

There are pros and cons when you consolidate college loans.  Now that college is over and you have finally graduated, it’s time to face your responsibilities in meeting your obligations.  You have to think about how you’re going to repay your college loans.  To help ease the burden, you could opt for loan consolidation.  But before you go into it, it is always best to consider the advantages and disadvantages.

Before that, you have to know how loan consolidation works.  When you’re in school, you borrow several student loans from different lenders.  With this, you might face a difficulty keeping up with all the payments.   Imagine having to make several payments to several lenders.  But when you consolidate college loans, all your student loans are rolled into a single loan from one lender, at a lower interest rate and even a longer duration to repay.  This might sound too good to be true, but before you go into it, consider the following pros and cons of student loan consolidation.   

· Single payment with one lender

Loan consolidation will make your life simpler.  You don’t have to deal with several lenders.  In fact, you would be making only one payment to one lender, thus it can be less hassling for you.  Less paperwork is also involved.  However, the bad thing there is you could be giving up some benefits that your current loans provide.  Such benefits include deferment eligibility and loan cancellation. 

· Repayment period extension for up to 10 or 30 years

You can extend your repayment period to up to 30 years.  But of course, the extension depends on your total school loan debt.  With this adjustment, expect your monthly payments to decrease dramatically.  This is very helpful especially if you have a hard time coming up with the monthly payments before the deadline.  Although it sounds too good to be true, there are also disadvantages to this type of arrangement.  When you stretch your debt over a longer time, you will end up paying more interest over the life of your loan.  In the long run, you’ll be actually paying more for your loan.  So if you can afford it, make sure that you choose the shortest repayment period possible in settling your accounts.  Besides, there’s no penalty for prepayment.   

· You can consolidate during grace period or in repayment

You can receive a lower consolidation loan interest rate.  That is, if you consolidate variable-rate Stafford loans during your grace period.  Grace period, by the way, is the six months time after you leave school and before you start making payments.  But then again, there’s a disadvantage to this.  You forfeit the remaining grace period when you start consolidating during grace period.  This means you would have to start making payments on your consolidation loan within 60 days.  To avoid this, try consolidating your loans during the later part of your grace period.  This way, you can make the most out of your grace period.  

Make sure you take these into account.  When making a decision whether to consolidate college loans or not, consider which weighs more: the pros or the cons.