Student loans are one of the most burdensome expenses that people deal with today. The average student loan payment is about $400 a month.
That’s a massive burden for anyone, including high-income earners. One way to bring down your student loan payment is to consolidate your student loan.
Do you find yourself asking “Should I consolidate student loans?” It may be a good option to bring down your student loan payments. Keep reading to find out if student loan consolidation is a smart move for you or not.
What Type of Loans Do You Have?
There is a big difference between federal student loans and having a loan through a private lender, such as a bank.
If you do consolidate or refinance your student loans with a private lender, then you do risk losing some of the loan repayment programs that federal student loans offer.
For example, if you have a loan through the Department of Education, you will no longer be eligible for programs like the Income-Based Repayment plan. Private lenders don’t offer them.
What’s Your Interest Rate?
Another difference between getting a student loan from the government and a private lender is the interest rate. The interest rates for federal loans are set by Congress once a year.
The interest rate for private student loans is set by the bank. There are many factors that will go into your interest rate, such as the bank, your credit score, and your income.
You want to make sure that you know the interest rate you’re currently paying and how much interest you’re paying each month.
If you’re towards the end of paying your loan, you’re paying off more principal than interest. It may make more sense to keep doing what you’re doing rather than consolidating because you’re going to pay more in interest in the long run.
However, if you have a student loan with a high interest rate and high monthly payments, you can lower both if your credit is in good standing. In that case, it would make sense to consolidate.
Should I Consolidate Student Loans?
If you came to the conclusion that you are better off consolidating your student loans, then you should start the process by evaluating debt consolidation offers.
You want to carefully look at the terms of the loan. Look beyond the monthly payment that you’ll make each month.
The key factors along with the monthly payment are the interest rate, the life of the loan, and how much you’ll really pay for the loan.
These need to be evaluated with your offer to determine if you should consolidate your loan or not.
Lower Your Student Loan Debt
Whether you’re in the middle of your career or just beginning, carrying student loan debt can be a very heavy weight to carry around. That weight can prevent you from doing things like taking a well-earned vacation or buying a home.
Should I consolidate student loans? It makes sense for many borrowers, but you want to make sure that you don’t do more harm than good.
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