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School Loan Consolidation - Is This An Option For Every Student?


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Many students take loans to fund their education and other expenses during their school years. The problem occurs when they have to pay back the loan to their lender. Fortunately, there is the option of school loan consolidation, which helps you merge multiple loans into a single loan.

However, you should find out every single detail before deciding to consolidate your school loans. You must know exactly if school loan consolidation is meant for you or not, and that means knowing all its pros and cons. For example, long-term payment schedule does reduce your monthly installments but on the contrary increases your total loan amount to be paid.

Moreover, in case of federal loan consolidation, interest rate is fixed which can be both in your favor and against you as well. Like, if the interest rate in the market comes down to what you have been paying to the lender, it can not be changed as it is fixed and can not vary, and there you may face the loss. In case of private loans, interest rate is variable, and can be high and low depending upon the market.

Consolidation will not be a good option for you, if you are thinking about your future career and life. School consolidation can be beneficial in the following two ways:

  • When you are already paying a much higher interest rate on credit cards or another type of debt.
  • When you are looking to borrow money at a higher interest rate.

There are many advantages of consolidating your loan but on the contrary it also has its downsides. First, have a look at the positive side of consolidating. You can simplify your life by paying just once every month. By extending your loan term that can range from 10 to 30 years, you can have low monthly installments. This procedure is known as ‘payment relief’.

On the other hand, there are few aspects which can make consolidation unsuitable for you. You have to realize that by extending your loan period you are increasing the total amount of the loan. This way you will end up paying more money in the long run.

Secondly, it is the locked interest rate. If sometime in future the interest rate in the market falls below to what you had been paying at, you can not change it as it is fixed in case of federal loan. And in the case of private loan consolidation, it is variable and can go high enough to create trouble for you.

However, with flexible repayment plans, no credit check and options to extend the length of your loan repayment, you can save up to 54% on your monthly payments through school loan consolidation.

School loans can prove to be a valid option for every student who faces financial crisis during and after study. Consolidating school loan seems like an intellectual and wise decision to take for students after graduating or even those about to graduate. However, one should keep in mind the pros and cons before actually consolidating their loan as situations may vary from student to student.

Sara Sentor


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