A college education is expensive, especially if you live in the USA. This is exactly why over 60% of the students graduate from college with a debt of over $35,000, as reported for the year 2019. The debt is even higher for some students, who either switched colleges or changed their majors.
With such a large piece of debt hanging over your head, you need to take some time out to plan to make money to do the repayment, to make it easier on you.
Now, the repayment of this debt is easier if you have a single student loan on your head. However, most of the time, that’s not the case. Most of the time, the federal loan is not sufficient to cover your entire college education.
You will then have to resort to lending bodies, banks or other forms of private lenders to cover the expenses for your remaining semesters in college.
The need for Student Loan Consolidation
This means you’ll be dealing with a number of different types of loan debts instead of just one, which makes the repayments quite confusing. One of the solutions to streamline the repayments of your debts is to apply for student loan refinancing.
However, before actually deciding to go ahead and try it, it is better to do some research and figure out if it’s really going to be beneficial or not, especially since once you have applied for it, there’s no going back.
What is Student Loan Consolidation?
Instead of repaying typically 8 to 10 debts with different interest rates and due dates, many choose to consolidate these loans into a single big loan so that they have to pay a single amount each month to a single lending body.
Not only does the technique make the repayments easier, but it can also sometimes cost you less than the sum of original repayments.
However, whether or not student loan refinancing is the right option for you depends upon a number of factors including the nature of each of the loans, benefits and your present finances.
Advantages and Disadvantages of Student Loan Consolidation
Let’s dig a little deeper into the advantages and disadvantages of consolidating student loans to decide if it’s beneficial or not in the borrower’s specific scenario:
Student Loan Refinancing Pros
- The biggest reason for a student loan consolidation is a single monthly payment with a single interest rate rather than multiple. It will save you from much trouble in keeping track of payments and also from making defaults, as is typically the case with individual repayments.
- A variety of refinancing plans is available spanning over 10 to 30 years. If you choose longer plans, you will be making smaller monthly payments. This makes student loan consolidation more affordable for most borrowers.
- You have the option of consolidating any number and amount of individual loans, without the presence of any minimum or maximum threshold. This qualifies all students for a student consolidation plan.
- Automatic repayments of the debt are possible to further release you of the trouble of keeping track of the monthly debit from your bank account.
Student Loan Refinancing Cons
- You might be paying more interest over your student loan, especially if you choose plans spanning over a greater period of time.
- Refinancing plans apply the weighted average over all your individual student loan interest rates to determine the final interest rate. This may end up being higher than the simple average of all the interest rates, especially if few of the sizeable loans have larger interest rates.
- Through student loan consolidation, some borrower benefits may be lost, that might be available on individual student loan plans.
Maryam Ahmad is a passionate blog writer and has written on multiple niches over the course of her three-year career in content writing. Owing to her engaging writing style, the websites Maryam has written for have seen their rankings soar. She also writes on her personal blog maryamswritinghub.blogspot.com. Read more of her articles here or reach her at Linkedin