When you were attending college, the multiple offers of student loans and the easy availability and access may have been a huge temptation that you simply could not resist. Many students rely on funding during their college years to not only pay for education, but also to help them meet the everyday expenses of being a student, such as rent or board, books, transportation, clothing, and other costs. For these reasons, many students end up with a huge student loan debt. Student loan consolidation can really turn your financial situation around if you are struggling to meet the monthly payments for your loan obligations.
Student Loan Consolidation Defined
Student loan consolidation is the process of taking many loans that were written by a multitude of lending institutions and servicers and combining them into one big student loan. It will feature just one payment to one lender and can be written at a better rate of interest with smaller, easier to manage loan payments being made each month that better reflect the income that you have available to meet your financial obligations.
Benefits of Consolidating Your Student Loan Debt
There are numerous benefits that can be reaped from loan consolidation. The most obvious benefit of consolidating your student debt is that you will make only one payment each month instead of writing checks to multiple servicers. These programs typically feature a greatly reduced interest rate on the balance owed, which can save you a ton of money over the course of repayment to all of your lenders.
Most student loan consolidations will allow the student to seek a reprieve from payment during times of hardship, such as when they are unable to find suitable employment or if they cannot make enough money to meet the payment schedule. The plans that are available under consolidation are typically very flexible and are built around the budget of the graduate in order to make their student debt more manageable.
A consolidation loan can also postpone the amount of time before the student enters into repayment, which is typically in the months just after graduation or when the student drops below half time enrollment in college. Additionally, consolidation programs will allow you to lock in a low interest rate that cannot go up even if the market fluctuates, like some variable rate loans can. Students are never penalized for paying early or for paying more than the payment due with a loan consolidation. Your interest paid during a consolidation loan is tax deductible.
Students Who Are Not Degree Holders
There should be no misconception – students are required to repay their student loans regardless of whether they finish school or not. For those students who have dropped out of school or dropped below half time enrollment, student loan consolidation is also an option that is available.