Need to Consolidate School Loans? Read the Fine Print

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While higher studies can mean a commercially rich career, the money it requires to study further is not easy to come by for many. Ninety percent of students pursuing higher studies depend on student loans. It is also a heavy financial burden to carry with you and manage smartly until you can settle on a career go pay it back. Most students end up juggling multiple loans from multiple institutions with various interest rates and repayment schedules. It can become nuisance when you have huge study loads and exams to handle as well. Consolidating your loans into one single account can make life easier.

The Loan Consolidation program allows students to consolidate various educational loans under one single scheme and a fixed interest rate. You cannot consolidate school loans before you graduate. Students who are married cannot consolidate school loans. Parents can consolidate school loans as well. However, before you decide to consolidate, you should know the pros and cons of it and decide whether consolidation will work for you or not.

First of all, not all educational loans can be consolidated. At the moment, under the Family Education Loan Program (FFELP) and Federal Direct Student Loan Program (FDLP), you can consolidate Stafford Loans, PLUS Loans, and Federal Perkins loans. You can consolidate private loans as well. So if you are planning to take out a education loan you can check before hand if it falls under either federal or private scheme. Secondly, it may not be necessary to consolidate school loans if they aren't too many. While it may work out functionally to consolidate school loans, it is not necessarily a financially beneficial move.

The first drawback is the fixed interest rate and the loan repayment period. If you consolidate school loans, their combined prepayment period can almost double to like 20-30 year and the interest rate will be fixed on that point. So if there is a drop in the floating interest in the market, you will be not getting any advantage out of it. If you absolutely need to consolidate school loans, do it during the "grace period", right after you have graduated and before you have found a job, as the interest rate tend of to be minimal then.

As you can consolidate school loans with any lender, you will probably save you some money by choosing the right one. Try using comparison websites which tend to be neutral. Many of these lenders will have extend bits to entice you, like discount on interest rate if paid through direct debit or discount if paid on time etc. Considering you will be repaying for a long time, even small savings each month can amount to a lot in the long run.

As we mentioned before, it is not necessary to consolidate school loans if you are able to track and repay them separately. The prepayment amount and schedule will be definitely smaller in that case. While the numbers can be mind bending, a little calculation cannot hurt. Sometimes consolidating loans can leave you with a higher amount to be paid monthly than you can manage. Failing to pay the monthly minimum charge can end up getting you a bad credit report which you really don't want.

So, if you think to consolidate loans is the only way to go for you, read the fine print and read it again to make sure you are making the best all the benefits available to you from this program.

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