Consolidating one’s student loans can make a lot of sense. In most cases, borrowers are typically able to lower their loan payment considerably, based on a lower interest rate, as well as a lengthened loan term.
In today’s environment of historically low interest rates, there are many good loan rates to be found. Yet, depending upon which way the economy and the financial markets turn, does it make more sense to wait for rates to fall further before proceeding with a student loan consolidation?
Should You Jump In and Consolidate Now Or Gamble on the Future?
Certainly, everyone would love to know what interest rates will do in the future. For any financial advisor, having advance knowledge of this could truly make them rich beyond their wildest dreams!
Yet, when it comes to borrowing money and paying based on interest, there are a couple of things to consider in order to determine whether it would be best to proceed now with a student loan consolidation or to wait a bit longer.
One of the biggest advantages to moving forward immediately is that you will be able to lower your payment that much sooner. For example, most student loan consolidations offer much lower payments than what borrowers are currently paying as the total on their present student loan debt obligations. This is due in large part to a new lower interest rate, a lengthened loan term, or both.
With this in mind, if you take a wait-and-see approach, you will be stuck for that much longer making your current monthly payments and with the possibility that even six months or a year from now interest rates may be the same or even higher!
But Wait! There’s More!
Although there are good reasons to move forward with a student loan consolidation now, there are also certain factors that may make a great deal of sense for waiting primarily reasons based on deferments and forbearance.
A deferment or forbearance allows a student loan borrower to temporarily postpone making their federal student loan payments or to temporarily reduce the amount that they are required to pay. In many instances, the ability to postpone or reduce your student loan payments can even help you in avoiding a loan default (or in the case of several student loans, the avoidance of multiple loan defaults).
What this means is that if you are not able to make your student loan payments due to unemployment or some other type of financial hardship, you can essentially take a break from making your current student loan debt.
This is an especially important consideration in light of the unemployment situation in the U.S. today. There are still many companies that are laying off or downsizing and if there is a chance that you could be out of a job in the near future, you may very well appreciate the breathing room of not having to make your student loan payments for a longer period of time.