School Loan Consolidation

Why School Loan Consolidation?

There are several reasons to consolidate school loans.

Lower Interest Rates

Very often, the interest rate will drop after you’ve completed school. If you have three loans that are at even half a percent more than the current rate, that’s a lot over time. Many companies will even offer special rates if you’re combining a loan from them with loans from other companies.

Reduced Monthly Payments

Through the combination of lower interest rates and longer payment plans, consolidating your loans usually results in a lower monthly payment. This can be very helpful when you’ve just graduated and every cent matters towards monthly bills.

Fewer Bills to Keep Track Of

Would you rather have to keep track of three creditors or one? It’s just easier to not have to worry about multiple bills.

Tax Breaks

You may be able to use your consolidated loan as a tax deduction. Some loans may be eligible up to $2,500 a year. Check with your lender to see if yours will be or not.

It Becomes a New Loan

As a “new” loan, it may be eligible for deferment or forbearance, even if the old loans weren't for various reasons. Again, ask you lender when you begin the process.

Why Not Consolidate School Loans?

While school loan consolidation is the right move for a lot of people, it isn’t a decision to be made lightly. Before deciding to consolidate school loans, consider that your loans will now be paid back over a longer period of time. Sure, that means the payments are lower, but it also means you will be paying back more in interest. If you don’t have to, you may not want to.

How To Consolidate

Find Your Loans

Figure out how much you owe, and who you owe it to. This might sound difficult, and it probably will be, but you will need this information before you can consolidate. If you have all your paperwork, it won’t be too bad – if you contact the companies you’ve gotten loans from, they can provide you with your current balances and pay-off balances (if the two are different).

Find a Lender

You can contact one of the lenders you’re already working with, or you can go out on your own and find an independent company. Two such school loan consolidation companies are Education Finance Partners and Student Loan Relief. Take notes when you talk to the lender, and read your loan paperwork carefully before you sign it.

Fill Out Paperwork

Everything in life requires paperwork, and this is no different.

Find a Co-Signer

This may not be necessary, but it’s not a bad idea to have someone lined up. If you’ve borrowed too much and are newly out of school, your credit may not be good enough to secure a loan. A co-signer will give you a greater chance of getting the consolidation loan.

When To Consolidate

The ideal time to consolidate is after you’ve completed school and your loans are coming due. In some cases, you may want to begin the process during your final semester. Most of the time, however, the full amount of the loans you wish to consolidate must have been disbursed. This means if there is still any money being held by the original lender for you, you can’t consolidate yet.

School loan consolidation can make payback easier, but it isn’t without pitfalls. Be careful and take notes whenever speaking to lenders. Don’t be afraid to ask for help from relatives or friends who may have more experience. Finally, make sure you don’t try to include any federal student loans in the private loan consolidation process. You will wind up paying far more than you have to because of the lower interest rates typically afforded to federal loans.

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