You are about to graduate from college, or you recently did. What should you be doing with your student loans? Besides paying them back, now is the perfect time to look into consolidating your student loans too. There are a large number of private companies that will help you consolidate your student loans at a lower rate. I’m pretty sure that you’ve received some type of letter asking you to consolidate your student loans at a lower rate. They tell you that if you consolidate with them, you can save money and pay off your loan in a faster amount of time. This is not the always the case. Sometimes students don’t save and payments take longer than expected.
Federal student loan consolidation can make it a lot easier for many students to stay on top of their loan payments. The current interest rate on student loans is 6.8% for Stafford loans and 7.9% for PLUS loans. These numbers are definitely higher than the rates that were being offered few years ago.
What should you do since the rates are high for this year? The choice is up to you. You can either go with an independent consolidation company or you can gamble. If you lock in your rates according to this year’s rates, you might miss out if the rates decrease next year.
The most common mistake made is extending the current loans. A lot of people really believe that by extending their current loans, they will save and receive the same perks as consolidating. An extension will really increase the overall amount of interest pay, while consolidation may reduce that same amount. Besides the lower monthly payments, student loan consolidation offers many more benefits. Discounts are offered to people who have a balance exceeding $10,000, and lenders give a small percentage discount to anyone who makes a certain amount of consecutive payments.
In order to qualify for a student loan consolidation you typically must have $7,500 or more in student loans. If your credit is bad, your chances of being approved for consolidation will decrease.