Congratulations on achieving your degree!  College is over and you have just found your first professional job. The future is looking bright for you.  However, there is just one dark cloud on that horizon of new-found freedom and that is your student loans.  In order to finance your college education, you had to borrow money and that is ok. Many students, even if they work, need help in financing their education.  However, once graduation is over, the real world intrudes and those student loans have to be repaid.

There are basically two types of student loans – those made by the federal government and those made through private sources.    The interest from the federal student loans is tax deductible; however, the private sources are not.  Having thousands of dollars looming over your head can be rather stressful, especially when starting your first job right out of college.  You have a credit history to worry about now as well as worry about how those student loans will affect your eligibility with attaining other loans like for an automobile or home. 

In order to save money in the long run, consolidating your student loan debt is the best course of action.  You can combine all your loans into one easy payment, typically at a much lower interest rate than what you are currently holding now.  Be advised that you should not consolidate any federal student loans with the private loans.  The reason for this is because when you consolidate, your interest rate is determined by an average that is weighted. So if one of your loans has a small balance but a higher interest rate than the others, that higher interest rate could affect the outcome of your consolidated rate, usually not for the better.  It is definitely something to keep in mind. 

Everyone has heard of student loan debt consolidation and knows it can be a good thing. However, not everyone knows the reasons WHY consolidation can be advantageous to you.  Therefore, here are a few reasons why you should consider consolidating that student loan debt:

1.  Consolidation takes the pressure off a bit. Some graduating students might have multiple loans that will have to be paid, all with different balances and varying interest rates.  It can be confusing.  By consolidating those loans into one easy payment, you are saving yourself a bit of time as well as money.  Having that one payment versus four of five is definitely less stressful and easy to keep track of.

2.  Build your credit score and history.  By having multiple loans outstanding, your credit score will be lower.  However, if those student loans were consolidated into one loan payment, your credit score will rise.  And by staying on course and paying in a timely manner, you can build a solid credit history.  In fact, after a period of time with no late payments, some lenders will give you a little rate break, sort of as a reward for “good behavior!”

3.  Save money in the long run.  If you have multiple loans outstanding, some will have higher interest rates than others.  You are actually saving money by eliminating those higher rates and consolidating into one new low rate. And since you are a recent college graduate with a new job, chances are you need all the money you can get for living expenses.

When deciding on the student loan consolidation route, be sure and shop around for not only a great rate, but a great lender as well.  There are so many scams these days, so do not fall prey to one of them. You will not only be out of money, but you will also still have all those loans to pay off.  Do your research, especially on those lenders that you have never heard of.  Contact your State Comptroller and see if there are any bad reports on the lender.  Call the Better Business Bureau and see if the lender is a member and if they have any outstanding complaints against them. 

Before signing on the dotted line for a student consolidation loan, it might be a smart move to meet with a financial counselor.  Many times, you can get a free consultation through your bank.  Knowing your options as well as any potential risks can enable you to make a sound fiscal decision for your future. 

Related posts:

1. Choosing Personal Student Loan Consolidation
2. How To Save On Student Loan Interest Rates
3. Student Loan Consolidation: Merging Your Loans Into One Account
4. The Advantages of Consolidating Student Loans Into One Account
5. Federal Student Loan Consolidation Can Save Money On Payments

Give us your rating of this article below!

Trackback URI | Comments RSS