Many people find earning a college degree opens many career doors. It is an established fact that people armed with a university degree command higher salaries than the same job applicants with a high school degree. Earning a degree takes hard work, dedication, and money. Most students take out one or more loans during their university years. Making several payments can be unmanageable for new graduates and they may be advised to consolidate their loans. What is student loans consolidation?
Student loans consolidation means refinancing one or more loans. This takes place after the student leaves school and enters the repayment period. Loans are put into two categories, federal loans and private loans. The two types of loan must be kept separate. A federal loan cannot be consolidated with a private loan. A borrower cannot consolidate loans with a spouse because the consolidated loan cannot be separated in the event of a divorce.
Borrowers who consolidate their student loans reap several benefits. Instead of making payments to several lenders, after consolidation they may need to make one payment for federal loans and one for private loans. Refinancing the loans can potentially decrease the amount of the payments made each month. Interest rates may decrease, depending on the type of loan that is consolidated. Federal students loans made after July 2006 carry fixed interest rates.
Consolidating those loans would not affect the interest rate, but the amount of payment made each month might be lowered. Interest rates on private loans can be significantly affected by student loan consolidation. Each loan may have a different interest rate and if this is the case, the new interest rate will fall somewhere between the previous highest rate of interest and the lowest rate. Refinancing may change the period of time the borrower has to repay the total amount of the loan.
Borrowers should do a little homework to answer the question, what is student loans consolidation. The benefits are all in the details, so be sure and read the fine print before consolidating a loan. Make an educated choice about student loan consolidation.