Few Pros and Cons of Consolidating Your Student Loans

It can be quite challenging to manage student loan payments at once. That is why consolidating student loans sounds so alluring. You can simplify things for yourself by combining all of your payments into one. It seems like the ideal answer.

The truth is that combining student debt has both benefits and drawbacks. To make the best choice possible, you should become familiar with these before beginning the application process. Also, you can get Beneficial Funding reviews from Crixeo.

Pros of student loan consolidation

  1. Debt managing will be easier

It makes paying off debt easier. You know how challenging it may be to make on-time payments on all of your student loans if you have several of them.

By combining, you can reduce the number of student loans you have and only have to worry about one monthly payment.

  1. You will get more time to clear your debt

You might be able to obtain an extended repayment plan when you consolidate. You may be given the additional time you require to pay off the loan under this extended plan. Additionally, a longer payback period typically results in reduced monthly payments.

  1. You could get a much lower monthly payment

If you refinance your debts with a private company, you might also get a lower monthly payment. In order to determine whether to provide you a cheaper interest rate on the private loans you have taken out, they evaluate your individual financial circumstances, taking into account your credit score. 

  1. For parent borrowers, it is the key to income-contingent

Consolidating your parent PLUS loans into a new federal direct loan is the only way to be eligible for the sole income-driven repayment plan available to parent borrowers if you are having trouble making payments on your parent PLUS loans.

  1. You can choose your federal loan service provider

You were not given the option to pick the loan servicer when you first obtained a federal student loan. They are commercial businesses that the government has hired to handle your loans.

However, you can choose from nine servicers to handle your new direct loan going future if you wish to consolidate your federal loans and are dissatisfied with your current servicer.

Cons of student loan consolidation

  1. You might not save money

Consolidating your federal debts is a wise option that will aid in debt management. Your monthly payment will be cheaper if you extend the repayment period, but you will end up paying more interest overall.

  1. A longer repayment term will end up with more interest over time

Consolidating your federal loans is unlikely to result in an interest rate reduction, unlike refinancing. Either your interest rate will increase or remain unchanged.

If you do receive a higher interest rate, it would increase your monthly payments and increase the cost of the loan as a whole.

  1. Consolidating privately means you lose federal loan benefits

Private consolidation results in the loss of federal advantages. Benefits like income-based repayment arrangements and loan forgiveness fall under this category.

You should therefore carefully consider whether you will require these perks. Don’t consolidate privately even if you anticipate doing so.

To determine your payments if you consolidated with the federal government or refinanced with a private company, use a consolidation calculator.

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