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Saturday, February 28, 2009

Why You Should Consolidate Your Student Loans

By Dennis Powell

Recent college grads and former students will find many benefits to consolidating their student loans. Frequently set up during the initial grace period after the borrower leaves school, consolidation programs offer the borrower a chance to reduce payments, lock in a fixed interest rate, and extend payment terms if necessary.

Simplified payment plans are one of the most visible benefits of student loan consolidation programs. Over the course of a college career, a borrower may receive funding from a variety of lenders at different rates, payoff dates, etc. The consolidation loan brings all of those loans into a single package and reduces stress for the borrower by providing them with a single payment that is due at the same time each month.

Locking in a lower fixed interest rate is a great benefit of consolidation loans for students. Interest rates change over the course of a students career, and most end up with a variety of rates - some fixed, some variable - spread over their financial aid package. A consolidation loan provides a clearer picture of how much the borrower is paying in interest and principle each month, and also makes it easier to calculate deductions at tax time.

A consolidation loan can also help reduce the borrowers monthly payment. Taking all of the payments from all of the lenders and rolling them into a single loan, often provides the borrower with a lower monthly payment and an easier to remember payment schedule for their education debt. Payments can many times be reduced still further by electing to have payments made to the lender automatically through the borrowers financial institution.

Extend your payment terms with student loan consolidation. Extended payment terms are another feature of consolidated student loan programs that can help borrowers get their careers started without having to overcome the burden of a large monthly payment. By taking extended payoff terms, a borrower can make lower payments on their loan when they are just out of school, then after a few years if their career has progressed they can often either refinance to a shorter term or make extra payments if they choose.

There are many benefits to securing a student loan consolidation program. Especially for recent grads just starting out on their career path, reduced monthly payments, fixed interest rates, and simplified record keeping provide borrowers with the tools they need to make a successful transition once they have completed their formal education.

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