Pros and Cons of Student Loan Consolidation

Student loan consolidation is something students are
beginning to consider because of the potential benefits
that it can have on a long term basis. Like with most
financial matters, student loan consolidation isn't all
about positives, though. There are quite a few negatives to
consider before pulling the trigger on consolidation. By
considering all of the potential pros and cons, students
and their parents can be sure to make an informed,
responsible decision with their loan.

The pros of student loan consolidation are many. The most
glaringly obvious positive to consolidating your student
loans is the fact that consolidation can lead to reduced
payments and interest rates. For students that have years
of loans under their belt, this can be an important money
saver and a way to jumpstart a financial future. Obviously,
the resulting interest rate must be lower for the
consolidation that in the prior loans.

As with most loan consolidations, there is the positive of
having the loan more organized. Though a loan is something
that college graduates should be able to keep up with, it
never hurts to have only one payment instead of having to
remember to make three or four different payments. With
student loan consolidation, this is made possible. With
only one payment being due, there's also the hope that your
credit rating could be improved over the course of time.

Though the positives of student loan consolidation certain
make it seem like something that all students should look
into, there are also a few potential negatives for students
and their parents to consider. Student loan consolidation
is quite final, meaning that a decision to consolidate your
student loans can not be reversed or changed. Once the
consolidation is agreed upon, the student loans are paid
off in full by the consolidating company and your payment
responsibilities are shifted.

In addition to being final, student loan consolidation can
be quite tricky. In order to gain this consolidation, one
must work hard to find a reputable bank that is willing to
lend the money. In addition to that, there's the problem of
finding an acceptable interest rate as compared to the old
rates. Because student loans can be both private and
government funded, borrowers must weigh the risk of taking
the government backing off of their loans.

Student loan consolidation must be done on two different
fronts, which makes it especially troubling. The
refinancing of federal student loans can be done at a very
low interest rate and coupled with government backing,
makes for a very easy transaction. Private student loans
must be refinanced and consolidated separately, creating
another hassle. Potential borrowers will find it especially
difficult to find suitors in today's market. Lenders have
tightened up their credit requirements, making it difficult
for students to finance such loans with their lack of
credit history.

There are many positives and negatives that come with the
school loan consolidation process. Though it can be a way
to stay organized and lower the payments, student loan
consolidation is a little bit of a risk. Having such a
large, unsecured loan in one place can have an ill impact
on a person's credit and can be quite a responsibility for
young adults.


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