When One Is Better Than Many: Consolidating Student Loans

The sad truth about student loans (or any type of loan) is that they cannot simply go away— every debtor needs to repay them. Consolidation provides a method of doing that.

What is it?

Consolidating your Federal student loans means combining your debts under a single lender, not unlike refinancing a mortgage. This lender will create a new interest rate from the weighted average of your loans, creating one payment at a single rate.

It sounds advantageous, especially if some of your loans have steeper rates than others. But a major drawback exists as well:

Your consolidated rate will always be higher than your lowest single one. You need to determine how much you could save based on the principles and rates of your loans.

If you stand to financially benefit, there are other reasons to consolidate:

There are no fees to consolidate.  Any lender that offers the service for a price is running a scam.

Alternative repayment plans are available. A consolidated loan allows for repayment over extended period, graduated payments, etc. This applies even to loans that otherwise wouldn’t offer these services.

There is no prepayment penalty. You’ll never have to worry about being locked into your loan.

Feeling ready to consolidate? There are still some guidelines to bear in mind before you go about it:

Your minimum owed balance must be at least $7500. It depends from lender to lender, but $7500 is about the lowest they will accept.

You cannot consolidate while still in school. Wait until your grace period begins, or after your first payment.

You can consolidate with any lender. However— many lenders are reluctant to consolidate student loans thanks to the Financial Crisis. Luckily, the Feds can still guarantee their service. Contact them at http://www.loanconsolidation.ed.gov

Consolidating with the Feds requires an online application. To fill that out, you must collect all records related to your loans and your payments. This includes even the loans you do not wish to consolidate. You also need your Student Aid PIN.

Consolidation could be a wise decision or a wasteful one. Like always: if you do your homework, you’ll come out ahead.

Alexander Carl

Alexander Carl

I find it difficult to brag about myself. Too modest? Perhaps.

Anyway: my name is Alexander Carl. I am a recent graduate of the University of North Carolina at Chapel Hill, where I spent four blissful years earning a degree in Communication Studies. Now I face the real world of economic downturns, student loans, and the absence of “academic” camaraderie.

Yet I refuse to be bummed. My economic philosophy is to live simply, save, and maximize whatever I can. Consumer culture is undeniably pervasive, but you don’t have to sell your soul to co-exist with it— there is great power from using your economic resources wisely.

I started writing when I figured out how to hold a pencil. Since then I’ve written short stories, poetry, screenplays, and have blogged. In fact, three of my screenplays have been produced into short films, two of which I directed. I’m no stranger to the media, having served as a DJ at a freeform radio station and worked as a crew member for live TV.

Pastimes include traveling (I’ll visit virtually anywhere), swimming, jogging, hiking, and hunkering down with a good movie.

Overall I’m a peaceful person, though not in a creepy New Agey way. I get my energy from music, good conversation, and the outdoors (I was an active Boy Scout, earning my Eagle). I consider myself “inquisitive” and “wry”, and for the sake of autobiography I’ll assume that I am.
Alexander Carl

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