Should I consider student loan debt consolidation?
The total amount of student loan debt in the United States is a moving target – and breaking records every minute.
In fact, a student loan debt clock, developed for MarketWatch, pegs the growth in outstanding balances at $2,726.27 every second, pushing the grand total closer and closer to $1.5 trillion.
The numbers are astounding, but the outcomes for individuals faced with these massive loans are devastating.
As they struggle to pay off their student loan debts and start their own lives, they live paycheck to paycheck, putting off milestones such as getting married, buying a house and starting a family. Some are forced to declare bankruptcy. Others expect to be paying back their student loans long after retirement – if they can ever afford to step away from working life.
Some borrowers may qualify for their loans to be discharged, forgiven or canceled. But most people grappling with college debt will have to look at other options, and they include student loan debt consolidation.
Student loan debt consolidation allows debtors to pull all of their payments from different servicers into one monthly payment.
Should you consolidate? There are plenty of benefits – and some drawbacks.
Here are some points to consider:
- Do you need a lower interest rate and monthly payment? Doesn’t everybody want those? If you locked in an interest rate when they were higher, consolidating when rates are lower could save you some money and be an attractive option. You also could exchange your loans’ variable interest rate with a fixed one. Consolidating also typically allows you to lock in a single, lower monthly payment.
- You’re not only burdened by loans, you’re loaded down by all of the paperwork for each one: Consolidating means you only have one loan – the consolidated loan – to worry about, cutting down on your paperwork and the complexity of paying it all off.
- You’re looking for alternative repayment plans and forgiveness options: Consolidating your loans may qualify you for these opportunities. Just remember: If you lengthen the time required to pay off your debt, you’ll also be making more payments – and paying more in interest, the U.S. Department of Education reminds borrowers. It’s critical to compare the consolidated plan against your existing payments.
- You’re in default on your loans and looking for options: You can consolidate a defaulted loan under some circumstances. But, according to the federal education department, you must make repayment arrangements on the loan with your current servicer or agree to repay your consolidated loan with specific repayment plans, which must be income based, pay as you earn or income contingent.
A lower interest rate, smaller payments and more options might all make student loan debt consolidation appear like the best solution for you. But pulling all of your loans into one might not be the best option for every situation. It’s important to look at all the options available to you and decide on the best solution that fits your unique situation. Professional student loan counseling can help you make sense of all the options and educate you on the process. Have questions? Contact CESI for a customized federal student debt analysis.
