Consolidating Student Loans
Many students apply for and receive a new student loan every semester. If you graduate after attending school for eight semesters, you could have eight loans to repay. That could require some juggling skills. Each loan could have a different due date, interest rate, and repayment term. What a nightmare!
Combining these loans into a single debt is called consolidation. Doing this may seem attractive. However, it might be more attractive if doing this offers you additional benefits. While this may seem like a routine decision, the primary reason to consolidate it is to bring your loan out of default.
Federal Student Loans
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As with most decisions involving federal student loans, consolidating can come with landmines that can hurt you. -
Why? Because most of the time, you may only consolidate your federal loans once. Additionally, consolidating these loans may incur a financial cost. Convenience may not be the most important reason to consolidate. After all, you can resolve an issue involving convenience by setting up automatic payments through your bank.
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If you need a loophole to resolve a delinquent or defaulted loan, it might be necessary to consolidate your federal loans. Consider consolidating your loans to lower your interest rate or modify other terms.
Private Student Loans
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In contrast to consolidating federal loans, consolidating private student loans offers some significant benefits. But unfortunately, each bank has different procedures and criteria. That's why you may get better results by working with a lawyer experienced in working with the institution that holds your private student loans. For instance, if you have a good income and a favorable debt ratio, your lender might be willing to lower your payments and interest rates. Alternatively, the bank might consolidate your loans on more favorable terms if you have a good credit rating and a stable income.
