Tips for those who wish to consolidate student loans
As July 1 draws nearer, the clamor for consolidation is increasing. Increasing numbers of so-called student experts are giving their two bits on the situation and are trying to influence students. There have been quite a few articles about consolidation, benefits and drawbacks. Some of these reports mention closing costs as a factor to watch for when consolidating a student loan. Here’s an important tip for students who are planning to consolidate their student loans.
Students should note that there never are closing costs when consolidating a federal student loan. You should also realize that when you consolidate, you are essentially agreeing to increase the term of loan from 10 years to nearly 25 or 30 years. This will of course lower the monthly payments considerably, but it will also increase the overall interest you will be paying during the life of the loan. Also, you must realize that when you consolidate, you might as well take your entire working life to repay your loan — 30 years is a very long time.
If you want to lock in the rates then there is no better option than consolidation. But if you are not prepared to repay your loan over a 25 or 30-year period, you could try an alternative. One of the best things to do in such a situation is to lock in the lower interest rate, and then attempt to pay the loan back within the original term. This will reduce the interest costs AND you will be rid of your student loan in just 10 years — a worthy bargain if you ask me. And the best part is that there’s no early payment fee with federal student loans.
If you enjoyed this article, please bookmark it at del.icio.us »