Find it hard to find unbiased information on student loan consolidation? Let me help with that. When I graduated from college, I had somewhere around $12,000 in student loan debt. Seeing how I would have multiple payments to different lenders, and fearing increasing rates over time (yes, your rate can vary depending on the loan type and the lender), I decided to investigate a potential consolidate student loan. But before I tell you what decision I made, let me give you a few benefits and problems with student loan consolidation:
- The ability to make a single payment with a single lender, thus reducing the headache of paying multiple lenders.
- Most lenders offer a fixed rate of interest over the life of the loan.
- Typically, consolidate student loan companies will offer a lower interest rate than many of your current student loans.
- Lenders will usually offer a longer repayment period, thus allowing for a lower monthly payment.
- Student loan interest is tax deductible, thus making a longer repayment period more attractive for tax purposes.
- Some lenders will even offer an interest rate discount for good payers – more on this in a minute.
- If you are struggling to find a job, many consolidation lenders will allow a deferment of forbearence, allowing you more time to acquire stable income, and may grant a lower interest rate for doing so, due to the lender accruing interest during the deferment/forbearance period.
- Longer repayment periods. Yes, I know I mentioned it as a benefit above, but it can also be a problem. While longer repayment periods tend to reduce monthly payments, the overall interest paid over the life of the loan is more, sometimes much more.
- Unwillingness to negotiate. During my repayment period, I called to ask if an agreement for a principal deduction could be reached or if there was help from other organizations to pay off the student loan, and absolutely no help was provided by the lender. I guess the felt I already got a good deal with an interest rate of 3.5%
- Default – Do not, I repeat, do not default on your student loan. Bankruptcy, and any other legal attempts to welsh on student loan debt won’t work – student loans are like cock roaches, they just will not die. Be sure to pay your student loan back.
Alright, now that we understand a few of the benefits and problems, I am going to tell you what I did. I decided to do a consolidate student loan. I felt there were just too many benefits involved. The company I went with was Nelnet, and they offered a 15 year loan repayment period with 3.5% interest and a 1% interest rate discount if I made the first 36 payments on time. What a great deal! As with all things, be sure to research several different offers before selecting a consolidate student loan company.