Three Simple Tips When Consolidating Student Loans

Your education is one of the biggest investments you will make in your lifetime. Therefore borrowing money and managing your student loan debt should be one of the most informed decisions you make. Consolidating student loans is an important first step to being a smart manager of your debt. When you consolidate loans the result is simplifying the loan repayment and lowering your monthly payment. However, to manage those student loans you must be able to manage the debt.

 First make sure to carefully explore whether or not debt consolidation is the option for you. Student loan consolidation can lower your monthly payments by giving you up to 30 years to repay the loan. Yet, if you increase the length of time to replay your loan, you will also increase the amount you pay through the cost of interest on those payments. In some cases this could be as much as doubled the total interest cost. It could be a better management of your student loan debt to consolidate only some of your debt, depending upon how many loans you have. This allows you to pay off the smaller loans faster while making a lower monthly payment to the consolidated loans.

Second, when consolidating student loans, ask important questions. Are there charges for origination fees or other payment penalties or fees? What is the maximum interest rate for the consolidation loan and what will the life of the loan be? Loan consolidation providers often give incentives for repaying the loan. When you consolidate, you may lose previous benefits, and in some cases even have to pay them back. Be certain you will not have penalties from your current loan providers or with the new provider you are considering to consolidate your loans. Smart questions mean a smarter management of your student loan debt.

Be sure you work with a lender who is willing to assure you understand the loan and it contents. You may have this loan for as much as 30 years, and if so, it is important you understand every aspect of the loan. Stay clear of any lender requiring a prepayment fee. You will always want to have the option of paying off your loan early, without being penalized.

A final word of advice. If possible, it is a better course towards student loan debt management to consolidate any Federal student loans through the government consolidation loan, rather than consolidating them into a private loan. No matter how good the private offers may sound, they do not allow you to keep all of the important Federal Loan benefits.