Student loans will account for more than $1.7 trillion in debt this year. On average, college students borrow $36,510 for federal loans and $54,921 for private loans. This data indicates that there is clearly a student loan crisis in the United States.
If you are one of the millions of Americans who are struggling with student loan debt, you have options. The student loan consolidation offers a way for you to combine multiple loans into one loan. According to experts at SoFi, “Consolidating student loans via refinancing could be a good idea for people whose financial position—in terms of employment, cash flow, credit, and other factors—has improved since they graduated from school.” Here are the top perks of consolidating your student loan debt.
1. Lower Monthly Payments
A hefty student loan payment can derail your budget. This is especially true if you are just starting your career. Student loan consolidation can decrease your monthly payments significantly. Lower payments can make it easier for you to save money, take vacations and pay living expenses.
2. Simplify the Loan Payment Process
If you have three student loan servicers, that means you are making three separate payments each month. Wouldn’t it be nice to have a single payment to one loan service provider? When you consolidate your student loans, managing your debt payments will be simpler. Instead of paying on separate days, you’ll make one payment per month.
3. Flexible Payment Plan Options
A student loan consolidation may provide you with more flexible payment options than you had with your previous lenders. Federal consolidation plans may include public service loan forgiveness, income-based repayment plans and forbearance/deferment options.
4. Reduce Stress
Student loan debt can take a toll on your mind and body. Some borrowers experience depression, anxiety and a sense of shame. When your student loans are too high, the threat of wage garnishments and bank levies can have a negative impact on your life. Affordable student loan plans can take the stress out of repaying debt.
5. Select a New Type of Loan
Student loans are available with fixed and variable-rate interest rates. Fixed-rate loans have the same rate throughout the life of the loan. With this type of loan, your payments will be predictable. Variable-rate loans are driven by market conditions. They can decrease or increase at any point. When you consolidate your loan, you’ll be able to select a variable-rate or fixed-rate loan.
6. Additional Time to Repay Debt
In many instances, consolidation loans will give you more time to pay your student loans. Some lenders may extend your loan term by as much as 10 or 15 years. If you plan to attend graduate school, you won’t have to worry about paying your student loans until you graduate.
7. Release a Student Loan Cosigner
When you consolidate your loans, you agree to be solely responsible for your new debt. Cosigners from previous debts won’t have to pay the loan if you default on the debt. This is a good option if you are ready to reclaim your financial independence.
When used wisely, student debt consolidation offers many benefits. Be sure to consult with a financial advisor or debt calculator to determine if this is a good option for you.