|By Archana Sabesan on May 25, 2012
If you borrowed a number of student loans while in school, you might have trouble keeping up with the different payments when it comes time to start paying them back. This is why student loan consolidation was introduced by the federal government. What this does is it allows the student to combine all their loans into one single loan, to try to reduce the monthly payments. This, in turn, makes it easier for the government to keep track of all the loans taken out by any single student.
One major advantage of consolidating your student loans is the lower interest rates, which eventually leads to lower monthly charges. When a student has applid for loans through different agencies, each one may give them a different interest rate that is most profitable to their agency. Each agency thinks that they are the sole provider helping the student complete their studies. However, through the loan consolidation process, when all the agencies are brought together, they have to start the negotiating for lower rates so the repayment can be made possible.
Consolidation can make budgeting easier for the student since they now only have one payment to make rather than several, which are increasing on a monthly basis. This allows for the student to focus on their economic future, and how to build a healthy financial life, rather than focusing on all the various payments. Consolidating can help the student work for an income, rather than work to pay off the student loans.
Moreover, loan consolidation programs are more flexible than individual loan repayments. The student will be able to decide his or her own schedule for their loan repayment, according to their comfort level, rather than being forced to pay all the money back in a short period of time. Students, especially, need to be given a little bit of time after graduation to get settled and get going on their income which is what consolidation programs offer. A longer repayment term automatically means reduced monthly payments, which works to the student's advantage.
Before making any financial decisions, it is important to do some research and gather all the information that you need. It will do you more harm than good if you jump straight into something without knowing anything about it.