College graduates know how hard they worked to get through school: they deal with the pressure to choose the right major, the long study hours … aand the responsibility to pay for it all. It is no wonder that graduates consistently feel a sense of pride and achievement as they receive their diplomas on graduation day.
Of course, with graduation comes more responsibility: finding employment, finding a place to live, and trying to carve out a life for oneself. For graduates who funded most or all of their education with student loans, they are faced with the added level of responsibility of repaying those loans.
Many people with college or graduate school degrees have had to take out multiple loans over the course of their education. This means that they are now faced with having to repay different lenders, with different bills due through the month. Managing all of it can be complex.
Another challenge is that the monthly payments can be overwhelming. For people in their 20s and 30s, in particular, cash is often tight. They can find themselves barely able to make ends meet – even before they factor in their student loan payments
For graduates who still have multiple student loans and are having trouble making their monthly payments, student loan consolidation can be an excellent solution.
Why You Should Consider Student Loan Consolidation
The benefits of student loan consolidation are many. For one, you are usually able to get a consolidation loan with longer repayment terms than the loans you have now. This means that you can stretch your payments out over more years, thereby reducing the amount of those payments each month.
Another benefit is that consolidating your loans gives you the opportunity to lock in a fixed interest rate. For federal consolidation loans, your interest rate will simply be the weighted average of those of your existing loans. For private consolidation loans, the rate will be determined by a combination of some standard rate (like the prime rate) and your credit score. Either way, having a fixed interest rate can give you peace of mind.
Finally, there is the added benefit that you are able to simplify the financial part of your life by only having to make a single payment to a single lender each month.
Student Loan Consolidation: Best Tips For Reducing Loan Payments
If you are considering student loan consolidation, here are the 5 best tips for reducing your monthly payments:
1. Know your credit score: Always research your credit score with all three of the major bureaus, since your score may vary from one to the next. (Note: for federal consolidation, skip this step as your credit score will not factor into your interest rate).
2. Take an accounting of all of your current loans: List out all of your current loans by lender name, amount of outstanding principal, and interest rate.
3. Decide how much you would like your monthly payments to be: If you opt for a longer repayment period of say 20 or 30 years, you can reduce your payments. But, of course, doing so will also increase the total cost of your loan.
4. For private loans, be sure to compare multiple lenders: More choices is always good when it comes to loans. Apply to 5 or more private consolidation lenders to increase your chances of getting the best deal.
5. Do not take the first offer you receive: No matter how good the first offer you get is, do not accept right away. Take your time and review all options before deciding upon a lender.
Considering these 5 tips as you move through the consolidation process could help you significantly reduce your monthly loan payments.