Benefits Of Student Loan Consolidation

The average student who completes an undergraduate degree also has $24,000 of student loans to go with it. Many students end up with at least four separate loans, with at least one for each year of college, which means four separate payments to manage each month. In addition, the repayment schedule for student loans often leaves graduates with monthly payments several hundred dollars higher than they can afford.

Students who have many student loans can often benefit from student loan consolidation. In this process, students take out one large consolidation loan that replaces all of the smaller loans. As soon as the process is completed, the student stops making payments on the previous student loans and starts making just one payment per month on the new loan.

The student loan consolidation process has several benefits

1. Lower Monthly Payments

Consolidating all of the debt often results in lower monthly payments for the borrower. This is a huge advantage for students who are just getting on their feet financially and can't afford the large monthly payments required on the original loans. Lower payments make it more likely that students will be able to keep up with the payments and build their credit score instead of ruining their credit with missed payments.

2. Lower Interest Rate

Many borrowers find they get a lower interest rate from student loan consolidation than they had on the initial loans. This is because students often have built a consistent payment history by the time they want to consolidate debt, and therefore, can qualify for lower interest rates. In addition, interest rates are especially low now and are very attractive for students looking to consolidate.

3. Simplify Financial Paperwork

Keeping track of all of the different student loans and the due dates for the payments can be a mess of financial paperwork. After going through student loan consolidation, borrowers just have one loan to worry about and one payment to keep track of. This makes it less likely for borrowers to miss payments. Missed payments can trigger late fees and put significant blemishes on the borrower's credit history, so it's best to avoid them if possible.

4. Eliminate Co-Signer

Many students have co-signers on their student loans because they had very little credit history when they first took out the loans. These co-signers, who are often parents or other relatives, may want to be released from their obligations. Student loan consolidation is the best way to do this because it allows the student to take out a completely separate loan without a co-signer. Getting rid of this feature can help ease relational stress that the co-signer may have felt.

Students who are interested in one or more of these benefits should definitely consider student loan consolidation. The process does not usually include any up-front costs, although students sometimes end up paying slightly more in interest if they extend the repayment period. Overall, though, student loan consolidation is an ideal way to help ease the financial stress surrounding the process of repaying student debt.