The Pros and Cons of Student Loan Consolidation

student loan consolidation

There are now more than one million students and graduates in the U.S. who have student debt. By now, many have heard about student loan consolidation. Though it’s generally a good strategy when tackling this huge mound-of-a-life burden, you should know a few things before opting to pay off and/or consolidate any of your loans.

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Making The Decision to Pay-off Your Student Debt

Everyone has that date at which they have to start re-paying the loans they took out in college, or by which they must make a call to a Sallie Mae adviser about deferring or forbearing their loans. Don’t worry, I had to do this a year after I graduated from my undergraduate program. I don’t feel one bit bad about saying I’m just like everybody else—I didn’t get into graduate school right away either. So for those of you for whom it took a year or two before you were accepted anywhere, know that I was in the same boat. I, too, had to continue living like a college student even after I graduated, and the infographic below gave me some helpful hints on how to manage my finances.

[Get more information on student loan consolidation from this infographic.]

Having a Source of Social Support Really Helps

Being alone in my  debt, and having parents who wanted to make sure that I wasn’t overwhelmed by this, I was brought on the track to consolidate my loans. Having graduated with over $50,000 in student debt, it was on my mind, and it turned out to be the right thing for me to do. (Although, I must note that I spent my first two years at a community college, which saved me a fortune.)

Pros of Student Loan Consolidation

Briefly, student loan consolidation takes all of your loans and groups them together. Rather than having different interest rates on different loans, you’ll have a one interest rate on the whole package. It is commonlylower than most of your loans. The chief advantage of loan consolidation is paying only one bill instead of many, but it’s not for everyone. What helped me get a good visual of how my student loans would change when I started paying them off was to use online student loan calculators. These really helped me visualize how much I was paying off on a monthly basis, and gave me confidence that I was making progress.

Cons of Student Loan Consolidation

So, when shouldn’t you consolidate? Specifically, if you have loans with different interest rates and are planning on paying more than the minimum payment each billing cycle (usually monthly), then consolidation keeps you from choosing which loan to pay off first, which is a pretty smart thing for any that have over a 7% interest rate. Since you won’t be able to pay off loans with the highest interest rates first in this scenario, you won’t save money on interest overall, so loan consolidation is best for those who have smaller amounts of debt to pay-off, with loans of relatively close interest rates. Keep in mind that once you consolidate it can’t be undone, so choose wisely.

 student loan consolidationDavid Walker currently is a writer with the student finance site, Student Loan Hero. He finds joy in balancing his budget and staying financially stable. He enjoys going to the Oregon Coast with his wife and daughter.

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