Pro and cons of consolidating a student loan games dating makeover 5
So, for a simplified example, if you have two loans, one for ,000 at 4% interest and one for ,000 at 6%, your consolidated loan will have a ,000 balance and a 4.7% interest rate.
By combining your interest rates, you also lose the ability to employ a favorite tactic of financial planners for paying down debt: targeting the most expensive debt, the loan with the highest interest rate, first.
Consolidating starts that clock over, so if you’ve been in an income-based repayment plan for five years and plan to stay in that plan until you hit forgiveness in another two decades, it’s not generally worth it to consolidate. Federal consolidation and private refinancing are very different.Some lenders offer an interest-rate deduction if you automate payments or consistently pay on time, and you probably don’t want these advantages to disappear (unless the interest rate is that much lower on your new loan).Pro: Your rates may be lower (or at least not higher).More students are taking multiple loans to help cover expenses.If you have the ability to make a lump-sum payment or consolidate these loans, you may want to look at your options.