Benefits of consolidating school loans
To a college grad swamped with multiple student loans that have come due, loan consolidation is an enticing option.When you consolidate, a lending institution pays off your existing balances and replaces them with a new, consolidated loan.Yet despite the appeal -- and its popularity -- student loan consolidation isn't for everyone.
It is critical that you do your research before you make any student loan consolidation decision.Over 10 years, you’ll pay about ,000 in interest on your original principal of ,000. Under your new loan terms, your loans will be consolidated into one ,000 loan—and you’ll have one new fixed interest rate, which is determined by taking the weighted average of the interest rates on your previous loans, and rounding up to the nearest one-eighth of one percent. Now, entering your loan information into a loan consolidation calculator, you’ll find that consolidating your loans gives you a new repayment period, which is figured based on the amount you owe – the more you owe, the longer this repayment period will be.It can vary from 10 to 30 years, but in this case it’s going to be 25 years. That’s a lot less than the 0 a month you would have spent on a standard 10-year repayment plan.If you read every article on this website, and you only learn one piece of information it should be to not consolidate your federal loans with your private loans.This is a mistake that could cost you a fortune in the long run.