Student Loan Consolidation: Is It Right for You?

If you've graduated college recently, chances are that you're beginning to worry about the day you start making payments on your student loans. Usually you have a fairly lengthy grace period after graduation, which gives you (hopefully) enough time to find a job that will give you a paycheck large enough to cover all your monthly expenses before your loan payments start rolling in. Perhaps now is the time to ask yourself: is student loan consolidation right for you?

Pros of Student Loan Consolidation

• College loan consolidation is perfect for students who have a large balance across multiple lenders-think more than $10,000 in debt. Consolidating helps you lock in a low interest rate. If you consolidate, your new interest rate will be calculated by averaging the rates on your current loans. If you don't consolidate your student loans, your rates could increase in the coming years.
• Student loan onsolidations makes it easier to manage debts. When you consolidate your loans, you'll only have one payment to make each month to one lender. Typically, your monthly payments will be lower when you consolidate.
• Consolidating your student loans can help increase your credit score by reducing the number of open accounts on your credit report.

Cons of Student Loan Consolidations

• Consolidating usually increases the overall cost of your loan. When you consolidate your student loans, the debts are combined into a new loan with a longer repayment term that can be as long as 10 to 30 years. This term allows you to reduce the amount you have to pay each month but increases the long-term interest costs of your debts. If you can afford to pay off your current student loans quickly, it may be a good idea not to consolidate.
• Student loan consolidators have a set of strict requirements for potential borrowers. Your current loans must be from select lenders, your total loan amount must exceed $10,000, you must have graduated or left school already and you must not currently be in default on your loans. So if your debt is minimal, consolidating isn't necessarily the best idea.

Alternatives to College Loan Consolidation

If your debt is large and you're having trouble paying your monthly payment, it doesn't mean that loan consolidation is the only solution for you. There are other programs and options when it comes to chipping away at your student loan debt.

• AmeriCorps will reward you with $4,725 to spend on your college debts and a stipend of up to $7,400 for volunteering for a year.
• Peace Corps will allow you to defer most of your student loans until after you leave the program. You may even get some of your loans reduced, possibly much as 70% if you're lucky.
• VISTA (Volunteers in Service to America) will pay off $4,725 of your loans if you join in on their cause for at least 1,700 hours.
• Military Service can give you up to $10,000 to pay off your loans if you join after graduation.

While many grads feel that student loan consolidations are the best solution, it's not perfect for everyone. Make sure you go over the amount of debt you have and all your options before you decide.