What are the benefits of loan consolidation?

The cost of a college education today exceeds $20,000 per year—that leaves students or their parents in debt for almost $100,000 for the typical four-year degree. Students who choose to obtain advanced degrees or enter Medical School or Law School will face even higher costs. Scholarships and grants only cover a small portion of the funds students need to complete their college educations, so they must rely on student loans. Although they do not have to make payments on these loans until after graduation, students can leave school heavily in debt and face having to begin payments on those loans even before they are financially prepared to do so. The introduction of student loan consolidation has helped ease this financial burden for graduating students.

Overview of Student Loan Consolidation

One of the problems with students who must apply for different student loans to cover their educations is there are likely to be different interest rates and repayment plans on each one. While this doesn't create a problem during the time the student is in school, it can be a problem after graduation when the student has to start repaying the loans. When a student applies for a student loan consolidation all the loans are combined into one payment plan with just one interest rate. The student is no longer obligated to the make payments to the original organization that provided those student loans but rather to the organization that is now in charge of the student loan consolidation.

Advantages of Consolidating Student Loans

When students consolidate student loans, they usually end up paying less than they would pay if they were to allow the loans to run the full repayment course. It's also possible for a student to pay as much as half of what he or she would originally have had to pay in monthly payments by obtaining a consolidation loan for the student loans.

Anyone who has ever had to make payments on more than one loan knows having one payment is much more simplistic. You don't have to worry about keeping track of each payment and its due date because you will be making one payment to one organization. This provides you with more cash to spend on getting your career started and beginning your new life after college.

Most student loan programs only allow approximately ten years for repayment. When you enter into a student loan consolidation program you sometimes have 25-30 years to repay the loans. In addition, there is a maximum interest rate of 8.25 percent that makes these loans affordable for those students just leaving college to embark upon a new career.

You do want to keep in mind that the original loans will be paid off by your new lender, so any kind of grace period or deferment that may have been allowable is now null and void. This doesn't mean the agency that provided the student loan consolidation doesn't offer these options; however, the ones that were part of your original student loan agreement are replaced by new terms and conditions.

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