That being said, I’ll be the first to admit that I was a bit skeptical when I first heard about student loan consolidation.My reaction upon first learning about student loan consolidation roller coastered from, Needless to say, I covered the gamut of emotion.
In the case of private student loans, it can be challenging for some borrowers to qualify for consolidation, particularly borrowers who have a lower credit score or who don’t earn above a certain annual income.
If you have poor credit or are behind in your student loan payments, you may not qualify for consolidation or may be offered an interest rate that’s not much (or any) lower than your current interest rate.
Because of the differing terms and regulations, federal student loans and private student loans aren’t generally consolidated with one another.
Federal student loans are usually consolidated through the federal government and the interest rate is calculated by using weighted average of all the federal loans being consolidated.
For federal loans, that means you forfeit and will not be able to reclaim them should you encounter a financial challenge in the future.
No guarantee of interest rate reduction Despite the common belief that consolidating automatically reduces your interest rate, that’s not always the case.As with all financial questions, the answer is highly dependent on your individual financial circumstances.If you’re curious about the potential pros and cons of student loan consolidation, here are some of the details that can help you make the decision yourself. Private student loan consolidation companies generally look at a few details as they create their offers: Some consolidation companies have a pretty tough criteria to fill.Check Your Rate Now Cons to student loan debt consolidation include…Loss of protections When you consolidate your student loan debt, you may lose some benefits attached to your original federal loan.Extension of repayment can cost more over the life of the loan Many student loan consolidation companies offer several repayment options, which means you may have the option to choose an extended repayment plan.