Student Loan Consolidation?
Question by adorable_gurl_06: Student Loan Consolidation?
I am wondering if I can do a federal and a private student loan consolidation because I have the federal loans which can be consolidated together, but I have a couple of private loans that cannot be joined in with those. So, can I consolidate the federal loans together and then do a private loan consolidation for my private loans, or Can I just do one consolidation?
Answer by NotAnyoneYouKnow
You can take out as many consolidation loans as there are lenders willing to consolidate them, but the better question is “why would you want to?”
Make absolutely certain that you have discussed the pros and cons of consolidation with a knowledgeable financial advisor before you take out a consolidation loan.
As any consolidator will tell you, you’ll probably pay less every month when you have consolidated your loans.
That’s about where they want you to stop reading and stop thinking, because the facts about consolidation loans go straight downhill after that.
Consolidation loans cut your payments by stretching your debt out for a much longer period of time. During that entire repayment period, interest continues to accrue on your loan, and the end result is that you will pay back THOUSANDS AND THOUSANDS of dollars more with a consolidation loan.
How many thousands depends on how many years you stretch out your loans – which of course also determines how much you’ll “save” each month by consolidating. Pay off a consolidation quickly, you won’t pay much additional interest, but you won’t “save” much every month, either.
Consolidation loans are nothing more than a brand new “mega loan”. They’ll tear up the terms of all of your existing loans, and you’ll be given a new loan with new terms. One of those new terms is a new interest rate, which will be determined by the current available market rates. Your new consolidation rate MAY be higher than the loans that you already have.
Consolidation is particularly questionable with your federal loans. Why? Because your federal loans have borrower benefit rights that your consolidation loans may not have. Most importantly, your federal loans have a nearly-automatic “economic hardship” deferment or forbearance privilege. If you’re not able to pay your federal loans because of economic hardship, all you have to do is contact your lender and request a forbearance or a deferment. Once granted, you will be given a postponement of your repayment obligation
Please, please evaluate these consolidation products carefully. The lenders are not offering these as a kindness – they’re offering them because they stand to make a LOT of money over the long life of your repayment obligation.
I hope that helped. Good luck!
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