So, you’re one of the millions of young Americans strapped with student loans. You’ve been trying to do everything just right; set enough money aside for each loan, make payments on time, remember all of your due dates, and more. And while there are a number of student loan payment options, you’re not sure which, if any, are right for you. One popular option is consolidating student loans. But is consolidating student loans smart?
Is Consolidating Student Loans Smart?
Before you decide to consolidate a loan, it’s important to understand what the process entails. Consolidating student loans can be a beneficial, but the success relies on whether the new loan agreement will save you money. Debt consolidation is the process of combining multiple different loans (in this case, student loans), into one new loan. The new loan will have one new interest rate, repayment period, and due date; effectively simplifying the repayment process. Ideally, student debt consolidation will also will help lower monthly payments.
If your loan payments are unmanageable, consolidating student loans can help. Just make sure you qualify for a worthwhile loan. The key is to make sure your interest rate is lower than what you’re currently paying. Otherwise, you won’t save money in the long haul.
Consolidating Federal & Private Loans
Whether you hold federal, private, or a mix of different loans, you have options. If you have federal student loans, you can apply for a direct consolidation loan. This process allows you to combine all federal loans into one loan with a single payment. If you hold private student loans, you have options to consolidate via your original lender or other institutions.
However, if you hold a mix of federal and private student loans, things can get a bit tricky. Federal and private student loans cannot be consolidated together, so before moving forward, consider how this caveat will impact your bottom line.
You should also be aware that if you consolidate student loan debt, you will lose eligibility to apply for federal student loan forgiveness programs.
So, is consolidating student loans smart? As always, that depends on your unique financial situation. The certified credit counselors at American Consumer Credit Counseling can help you to fully understand all of your options and make the best decision for you.
For more information on consolidating student loans or managing your finances, call ACCC today at 800-769-3571.