Education Loan

Government Student Loan Consolidation

Education being what it is nowadays, it is no wonder that more and more students are funding their studies with educational loans. There are many private and federal providers of student education loans, but the federal loans are preferable over the private ones because of their easy repayment terms. There are three main kinds of federal student loans available, the Strafford loans, the Perkins loans and the PLUS loans. Most students choose between these three. At the same time, it is not possible to fund the entire three- or four-year education period with just a single federal loan. There are many students who take a new loan each year to fund their education and related expenses.

All this seems well as the education is going on, but the entire indebtedness hits the student hard in the face when graduation is complete, and when the student has to begin the repayment on the loans. Even if three different federal loans were taken in as many years, the student will have to make three different payments each month to the three creditors. And these would be at different rates and with different rates of interest. That could certainly be a big impediment for a student who is just starting out a career.

This is where government student loan consolidation comes in. Consolidating loans simply means combining different loans into a single loan so as to effect a single payment each month instead of several inconvenient staggered payments. The first advantage is definitely the ease of repayment. Instead of making many payments, the federal consolidated loan will attract just one payment per month, and that could be better managed by the student.

Then there is also the mental relief for the student that he or she is answerable to just one creditor (i.e. the student loan consolidating company) and not to the many individual creditors as before. If there is a defaulted payment on the federal consolidated loan, then it will lead to only one blemish on the credit report, rather than the many bad marks that would come if the individual loans were defaulted upon.

But that is not all. The prime intention when getting loans consolidated is to make the monthly payments laxer. When several loans are consolidated into one, the consolidated loan invariably has a lower rate of interest than the individual loans. Therefore, the total payments per month come lower than what the student was paying before the consolidation.

However, there is a downside to getting a government student loan consolidation also. The student loan consolidating company that you select will combine all your federal loans, but will spread them over a longer repayment period. That is the reason why your monthly payments become lesser. But you will have to keep paying for a longer term. When you think about it, it is evident that you will actually end up paying more in amount than you would have with individual student loan repayments. For example, two of your individual five-year loans, could be spread over to a ten-year period single loan. Now since you are paying for a longer period of time, you will have to repay more interests by the end of the term, even if the monthly bills are reduced.

So, you have to be wary when making your decision about the federal student loan consolidation. With such consolidation, you will get breathing space each month, that is true, but you will also remain indebted for a longer period of time. Should you then go for federal student loan consolidation? The choice is all yours to make.

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