Student Loan Consolidation

According to The College Board, an estimated 60 percent of bachelor's degree recipients obtain loans to fund education, with an average total debt of $22,700 for 2006-07 graduates. If you have student loan debt, paying off your loan(s) is crucial. Repayment affects your credit rating (both positively and negatively) and your credit rating can affect your ability to buy a car or even find a good place to live. Consolidating your student loans may be one way to help you repay your loan(s).
Like a home owner who refinances a mortgage, you can refinance or consolidate your student loans to lower your monthly payment or combine several loan payments into a single monthly payment. Keep in mind however, that consolidation loans use a weighted average interest rate, which may lower the interest rates on some of your loans and increase the interest rates on others. Also if you extend your repayment period, you'll end up paying more interest in the long run.

Student Loan Consolidation Services

Consolidating your student loan and lowering your monthly loan payments can give you more discretionary income each month. If your loans are almost paid in full, consolidation is not a good idea but it might be a good option if:

• You are currently making multiple monthly payments or payments to different lenders
• Your loan payments are high compared to your income
• The interest rate on a consolidation loan is lower than the rate on your loan(s)

Because loan consolidation services are competing for your business, they offer inducements to consolidate your student loan debt with their company. They may offer lower interest rates when you automatically deduct payments from your checking account or when you apply for your loan online. Be sure to shop around to get the best deal.

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