School Loan Consolidation

So, you've graduated college and your prize is a stack of various school loan bills in your mailbox every month?  Well perhaps you would benefit from consolidating your school loans.  The first thing you need to do is determine if school loan consolidation is beneficial for you, and if it is, whether you should consolidate your school loans with a private company or with the Federal Government, via the Department of Education.

School loan consolidation allows you combine all of your school loans in to one, with a fixed interest rate, and can often lower your payments. 

Is Consolidating School Loans Right For You?

The most obvious benefit of consolidating school loans is to combine all of your school loans so that you only have one payment to make per month, usually with a lower total monthly loan payment.  To determine the rate of a Direct Consolidation Loan, you figure out the weighted average interest rate of the school loans that you're consolidating, and round that figure to the next highest one-eighth of a percent.  This becomes your fixed loan rate, and will never be higher than 8.25 percent, but is often substantially lower.

Another reason you might find that school loan consolidation suits your needs is if you're struggling to make your loan payments every month, and are trying avoid default.

While consolidating your school loans is designed to be to your benefit, there are some situations where it might be better to continue paying your loans the way you currently do.  If you don't have a lot of payments left before your school loans are paid off, consolidation might not be the right choice for you.

If you can afford your school loan payments, you should consider what is more important to you - more disposable income per month now, or more money in the long term.  While consolidating your school loans is designed to lower your payments, it generally increases the length of time you'll be paying, and you wind up paying a larger total amount.  Most people find the immediate per month savings on school loan payments is worth it, on the assumption that your income will grow with each year.

Federal Or Private School Loan Consolidation?

In deciding whether or not to consolidate your school loans, it's important that you research the many options available to you.  Some people choose to go with federal school loan consolidation, while others prefer consolidating their school loans with a private company.  Every school loan consolidation option offers it's own set of advantages.

Always remember that if you consolidate your loans with a private school loan consolidation company once,  you may later reconsolidate it with the Department of Education.

Deciding to consolidate your school loans is a big decision as you will most likely be paying for a number of years, so again it is of the utmost importance that you do extensive research to determine first if you'll truly benefit from consolidation, and second which type of school loan consolidation will work best for you.