Student loan debt can quickly become overwhelming, particularly if you are making multiple payments on multiple loans. Consolidating student loan debt can provide some relief, as the monthly payment will be lower and the multiple payments are eliminated, as you will be repaying just the one consolidation loan payment. While this can be extremely beneficial, there are also disadvantages to student loan consolidation, so it is important to make an informed decision based on your financial situation.
Federal Student Loans
BECU does not offer loans for federal student loan consolidation, and there are only a few who are permitted to do so. They do, however, offer other consolidation options that include private student loans. If you are not able to consolidate your federal loans, you may want to consider deferment or forbearance to avoid defaulting on your loan payments.
You may also want to consider exploring alternative payment plans, which can reduce your monthly payments, at least for a certain amount of time.
Private Student Loans
Private student loans, in addition to other debts such as credit cards or auto loans, can be consolidated into a single loan, which eliminates multiple monthly payments. Although this is much more convenient, you need to be aware of the loan details to determine if consolidation is the best option for you. In many cases, consolidation will lead to paying more money over time because of the extended repayment period.
If you have both private and federal student loan debt, you may want to consider an option that will allow you to consolidate both, or you may choose to consolidate your federal loans in one consolidation, and your private loans into a separate consolidation. Although this will require two monthly payments, it may still reduce the number of payments and allow for a reduction in your monthly payment amounts.
How to Make Consolidation Work for You
When comparing your consolidation loan options, be sure to consider the interest charges and annual percentage rates (APR) and any additional loan fees and charges. Some loans may come with a loan fee or an origination fee. You will want to compare the interest rate and APR of the consolidation loan with the rates you are currently being charged. Student loan consolidation is only beneficial if you have a lower interest rate and lower monthly payments.
Before you sign a loan agreement, be sure to understand the loan details, and take some time to analyze your current student loan debt to determine how beneficial a consolidation will be for your financial situation.