College is supposed to be about gaining the knowledge to succeed in the world and a college diploma that will lead to a great career. Unfortunately, these days the only way for most students to attend college is by taking out student loans.
The average college graduate now holds over $25,000 in student loan debts, a fact made even harsher by a weak job economy. If you’re worried about being able to pay off your student loans, debt consolidation might be the answer. Here are a few tips on how to consolidate private student loans.
Is It Worth It?
The first thing you should do when considering debt consolidation in ask yourself if it’s right for you. Debt consolidation is essentially selling off all of your private student loans to one new loan company. It can make student loan payments easier because instead of paying multiple loan companies with many different interest rates and regulations you can have one low loan payment a month from one company with one set of rules. It makes it easier to pay off your debts.
Research The New Loan
Before immediately signing anything that ties you to student loan consolidation, be sure to read through the terms of the loan. You want to make sure that you are completely comfortable with the rules, especially since they will be different terms than the ones you original signed when taking out your private student loans. Every term will be your responsibilityso it’s important that you go into loan consolidation with as much information as possible.
Low Interest Rates
One of the perks of consolidating private student loans is that you can lock in a lower interest rate. Usually consolidated loans have much lower interest rates, but depending on when you apply, the offered interest rates may be different. Interest rates will likely get higher and higher over time, so it’s important to go through the process of consolidation as soon as you can, as long as it’s the right option for you.
Overall Cost
Another advantage of consolidating your private school loans is that you will likely have a lot more time to pay off the loan. Many loan payment plans last as long as 30 years. Therefore the monthly payment will be lower. Since your loan gathers interest over time, you will likely spend more money overall when repaying your loan, but in smaller payments; it’s important to weigh the benefits of a smaller monthly payment or longer loan repayment plan, and base your decision off which option is better for you.
Check the Requirements
Before consolidating your private student loans, you should find out what the requirements are to qualify the loan. For example, at CedarEdLending, you must have a steady, reliable income of at least $2,000 a month. Most organizations will require you to meet a certain credit requirement as well. If you’re unsure you will meet the requirements, increase your chances of being approved for a loan by getting a creditworthy cosigner on your consolidated loan.
How Much Do You Need?
It’s important to consider how much money you need to cover your loans. If it’s less than $7,500 a year, then you may not qualify for a private loan consolidation. $125,000 is the maximum for undergraduate debt, while graduate school alumni qualify for $175,000.
Deciding to consolidate your private student loans is an important decision that deserves time to consider and research. Who knows, it could be the best decision you can make in your post-college life.