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Friday, February 20, 2009

Should I consolidate My Student Loans?

By Dennis Powell

Student loan consolidation programs are often a useful tool for recent grads to manage their loan payments at the start of their careers. Many consolidation programs offer extended terms, fixed interest rates, and a variety of payment options which make monthly payments more affordable for people on an entry-level salary.

For many former students, loan consolidation offers an opportunity to build their credit and get their professional lives started on the right track. Even with the higher overall cost of extended payment terms, borrowers may find the lower monthly payments easier to make at the outset of their careers.

Minimum monthly payments on student loans can be high especially for borrowers with entry-level positions. Many consolidation programs allow graduated repayment schedules which allow the borrower to make lower payments upfront and higher payments as their income grows. Graduated monthly payment programs are a nice option for borrowers with high income growth potential.

Education loan consolidation candidates who start work immediately upon finishing their college careers may want to consolidate to lock in interest rates. Upon consolidation borrowers give up many of their deferment options and begin making payments within 60 days of their consolidation loan signing. For borrowers on sound financial footing the loss of deferment options may be a worthwhile trade-off to lock in a low interest rate.

If a borrower finishes school with a good credit rating they may find that they can get lower interest rates through consolidation than they had on their original private loans. Many private loan consolidation programs base their interest rate on a borrower's personal credit history. If your credit rating has improved during your school career you may be able to save money through consolidation.

Recent grads starting out and demanding careers may consider consolidation for its simplicity as well. Depending on the type of loans that a student used during their college career, a consolidation loan can provide the borrower a way to make one or two payments each month rather than several. Consolidation also simplifies recordkeeping, and eliminates the paperwork associated with having several different loans.

Consolidation is not for everyone however, and borrowers need to take a good look at their toll financial picture to determine if it's right for them. Students with smaller outstanding loan balances may also want to forgo consolidation. If making the monthly payment on your student loans will be merely an inconvenience rather than a burden it may be to just suck it up and get your loans paid off sooner rather than later.

There many financing options available for people with education debt. Between tuition, books, and living expenses incurred during college typical borrower leaves school with nearly $20,000 in loans. Student loans provide a six-month grace period upon graduation before payments are expected. Smart borrowers will take that time to shop for the best consolidation program for their financial needs. If you decide to consolidate make sure that you choose a program that makes sense for you both now and in the future.

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