Why You Should Consolidate Your Student Loans

Is it your senior year of college? While graduation may be just ahead of you, or you may have already graduated from college long ago and have already entered the workforce, there is one important thing that you should do: Consolidate your student loans. Consolidating your student loans can save you time and money.

Depending on where you went to college, and what you went to college for, you may have student loans that range anywhere from twenty grand to well over a hundred. While you may initially believe that your student loans are just one payment that is not the case. There are several different types of student loans, and you may have one or more of each.

Subsidized Federal Stafford Loans are loans that have a special low interest rate because the government helps to pay for the interest while you are either in college, are in a grace period, or have taken a deferment.

Unsubsidized Stafford Loans are loans where the interest must be paid by the student or person whose name appears on the loan while classes are being taken. There is still usually a low interest rate on an Unsubsidized Stafford Loan.

Federal Plus Loans are loans that your parent may take out for you; however they are contingent upon their credit history and the amount needed. While the interest is still low on a Federal Plus Loan, one will need to begin paying it back either two to three months after receiving the funds or after graduation.

Federal Perkins Loans are only granted to students that meet special financial circumstances. They will still have a low interest rate. One of the drawbacks of a Federal Perkins Loan is that there is only a certain amount of money you will be able to qualify for. You must remain at least half time student or else the interest will begin.

When you graduate you may have several of the above types of loans, with varying amounts. It can be very confusing to have to pay several different bills in one month. By consolidating your student loans, you will only have to pay one bill a month. Because you will often be able to pick the length of time, or term, of the loan, it may be possible to have a lower monthly payment when you consolidate your student loans - rather than paying several different bills that add up to a higher dollar amount.

While it is true that electing to pay your student loans over a greater period of time will result in a higher amount of money that you will pay total, there are some things you should take into consideration. The first is that by consolidating your loans you will be paying less a month on your bills, freeing up capital to spend on other expenses. Second, your student loan interest is tax deductible off of your income. Third, over time you will receive pay raises and be able to pay more towards the principal of your loan should you decide to. Finally, inflation will cause the amount you owe to become less. All of these factors are reasons you should consolidate your student loans.

When you consolidate your student loans, be sure to have them automatically deducted from your checking or savings account. This will allow you to never miss a payment, so long as you keep sufficient funds in your account. By having auto debit you will never have to worry about having a late payment affect your credit score.