Student Loan Consolidation Center

Private and federal loans consolidation – is it bad?  Well, the truth is that there are both good and bad aspects of both a private and federal consolidation loan.  For students who are getting ready to graduate, often the goal is to consolidate outstanding student loans to make it easier to manage finances.  During this time, students have the opportunity to get their feet on the ground without being swallowed up by debt.

Before we address the question of private and federal loans consolidation, is it bad, we want to provide information on what each of these loan options are.

Private Student Loans

The number of students choosing a private student loan is on the rise.  In fact, it is estimated that numbers are increasing by 25% every year for students choosing private funding over federal.  Typically, this type of loan should be considered if their Federal Stafford loan has reached its maximum.
 
Some of the positive things about private student loans are that they are more and easier to get.  The one thing to think about is that in some cases, lenders will charge high fees, which means the actual loan is greater and more expensive.  Remember, even if you would pay a low interest rate, if the fees are substantial, then you are paying out more money.

Federal Student Loans

Of all student loans, the Stafford loan is by far the most common.  For one thing, the Federal Stafford loan is very affordable, easy to get, they come with the lowest interest rates possible, there are numerous options for repayment, and best of all, payments are deferred until after a student graduates.  Keep in mind, most students will take out Stafford loans first and when these are maxed out, they turn to private loans.

Okay, to the question of private and federal loans consolidation – is it bad, we want to show you some important information that will help you in making the right choice for your particular situation.  It is common for students to take out multiple loans with varying interest rates.  However, after graduation while trying to secure a good job, the payments can be very difficult to manage.

However, with a consolidation loan, both private and federal student loans can be included.  However, there is one very important note – if you were to take private and federal loans rolling them into the same loan, you are putting yourself at risk.  In this case, it is likely that all the federal loan benefits to include a deferred repayment schedule would be taken away.  Therefore, be very careful when considering this.

Advantages

As you will see, using a consolidation loan to handle finances better, there are a number of advantages that include:

• Lower Monthly Payment – Sometimes, the high payment alone is the problem with multiple student loans but by consolidating them, the payments would decrease.  In fact, in some cases, lenders can lower the monthly payment by as much as 53%.
• No Fees – When it comes to student loans granted by the government, there are no fees
• No Credit Check – Again, student loans under the government require no credit check
• No Penalty – If you wanted to pay the consolidation loan early, there would be no penalty for doing so
• Multiple Plans – With private student loans, there are four unique plans from which to choose
• Simple Processing – The application process for securing a student consolidation loan is very easy and fast

Disadvantages

Of course, there is the other side to the story in that private and federal loans also come with some disadvantages that you should know about to include:

• Extended Plans – If you were to choose an extended plan in which the consolidation loan is paid off in 30 years, you would likely pay a higher interest rate
• Grace Period – For you to benefit from student consolidation loans, you need to do so within a six-month period after graduating.  Otherwise, the consolidation period would be past.
• Weight the Odds – Depending on the amount of money already paid toward your outstanding student loans should be considered in that if there are low balances, it might not make financial sense to go through with a consolidation
• Perkins Loan – Benefits associated with a Perkins loan would be forfeited if loans are consolidated.

The bottom line – private and federal loans consolidation – it is bad, the answer is both yes and no.  As long as you understand the risks and downsides to securing a consolidation loan, then you can make an educated choice on the right direction to take.  Most students who choose consolidation find the benefits outweigh the disadvantages.