June 15, 2016
In the short term, consolidating your student loans privately has obvious benefits — consolidation can help reduce monthly costs and make debt less burdensome.
Consider also these five long-term benefits of private student loan consolidation:
- Save money. Lowering your interest rate with a private student loan consolidation, can lessen your financial strain now. Plus, you are more likely to have funds available for your next big purchase such as buying a home or paying for a wedding. For instance, a loan consolidation could cut your monthly payments in half — someone with a student loan debt of $10,000 and a consolidated loan rate of 6% for 15 years, could bring $170 monthly payments down to $84.69.
- Releasing a cosigner. Many students with little steady income and/or credit history must involve a cosigner to qualify for a loan. Consolidating to release your co-signer can have long-term benefits for that individuals’ credit score and financial stress while also, possibly, enhancing your relationship with the person who was kind enough to share your loan debt.
- One payment is easier to manage. Consolidating your loans with one provider can make repayment easier than carrying multiple loans with more than one servicer. One lender can make meeting payment deadlines and keeping track of how much you owe more manageable. That’s a long-term mental health benefit you can’t underestimate.
- Flexible repayment terms may mirror your career expectations. Some private student loan consolidations offer repayment plans based on your income. If you are a new graduate who anticipates earning more in the future via raises and promotions, you can benefit from signing the type of plan that sees your payments increase over time. For instance, in some 15-year refinance plans, the first four years are interest-only with the remaining years payments based on a level interest and principal.
- Avoiding default. Loan consolidation can help borrowers struggling with large monthly payments or high interest rates avoid serious financial repercussions of going into default.
When considering consolidation plans, be wary of origination fees and be conscious of the lifetime costs that may be affected by changes in your repayment terms. Nevertheless, private student loan consolidation can be a smart solution. Contact a student loan professional and discuss your consolidation options today.
Please note that the information provided on this website is provided on a general basis and may not apply to your own specific individual needs, goals, financial position, experience, etc. LendKey does not guarantee that the information provided on any third-party website that LendKey offers a hyperlink to is up-to-date and accurate at the time you access it, and LendKey does not guarantee that information provided on such external websites (and this website) is best-suited for your particular circumstances. Therefore, you may want to consult with an expert (financial adviser, school financial aid office, etc.) before making financial decisions that may be discussed on this website.
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