Consolidate Federal Student Loans – Advantages and Disadvantages

As you approached your graduation from college, more than likely you’ve already had consolidation services contacting you about your student loans. Of course, as you are bombarded with all this information, it can be difficult to figure out whether or not consolidating your federal student loans is the right option. This type of consolidation is only for federal student loans, and there are both advantages and disadvantages for you to consider as you make your decision on federal consolidation.

Advantages:

• When you consolidate your federal student loans, in most cases you will be able to lower your monthly payments. The rate you get on the consolidation loan will be lower than the total combined interest on the loans you have. The low rates and the ability to extend repayment time can help you to lower the payments you make each month.
• When you go with a federal consolidation for your student loans, you’ll be able to make just one payment, making your finances a lot easier to deal with.
• There are four different repayment plans that you can choose from. There is an extended plan that can even lengthen your loan to 30 years, making it easier to pay. Another repayment option is a graduated option that allows you to start out paying just interest, and than as time goes by, you start paying higher payments.
• When you go with a federal consolidation loan, your credit won’t matter. They don’t do a credit check and your credit won’t affect the rates you get on the loan.
• If you need to pay off the loan early, you won’t get a prepayment penalty.
• The application process is fairly simple for a consolidation.
• There are no fees that have to paid in order to take advantage of a federal consolidation loan for your college loans.

Disadvantages:

• If you do decided to go with a payment plan that has been extended, over time you’ll end up paying more on the loan, so this could affect your finances in a negative way.
• In some cases, the rates on your new consolidation loan could be higher than what you have on some of your other loans. This may mean that consolidating is not the best answer to you.
• If you decide to consolidate while you are still in your grace period, you will end up losing the rest of the grace period that you have left.
• When you consolidate, you may lose some of the special benefits that come with particular loans, such as the Perkins loan.
• If you’ve already paid off quite a bit of your college loans, then it may not be worth it to consolidate those loans.

There are definitely advantages and disadvantages to consider before deciding that federal student loan consolidation is right for you. Carefully look at both sides of the situation and make a good decision that will give you the most financial advantages.