The Decision to Consolidate Student Loans
Consolidating student loans can improve the bottom line
Consolidating student loans may be a helpful alternative for someone struggling to pay off multiple loans, particularly if some have high variable interest rates. Although college loans are considered to be good debt because they are financing a person’s future, they can nonetheless be a burden to repay. Those who find themselves in deep student-loan debt after their educations are complete often find that consolidating student loans really helps with the bottom line.
The decision to consolidate student loans
There’s no right or wrong answer when it comes to whether or not you should consolidate student loans, but there are many factors to consider. The only answer that applies universally is that whether you should consolidate depends on your individual circumstances at the time, including type of loans you have and their interest rates. For instance, as of 1996, PLUS and Stafford loans have featured a fixed interest rate. For students with loans prior to 1996, however, the interest rates were variable. This means that the rates on these loans may continue to fluctuate each year. People with a variable rate often consolidate their loans in order to obtain a lower fixed rate.
Getting the best rate when consolidating student loans
Variable interest rates for student loans are established on July 1 of each year. Depending on current interest rates, a person planning to consolidate may want to wait until July 1 to do so, especially if interest rates have been falling.
Treasury-bill rates and student loans
One way to gauge how student loan interest rates are shaping up is to watch the government’s interest rate on the 91-day Treasury bill upon which student loan interest rates are based. You can do this very easily online at the federal government’s public-debt website . Note that special formulas apply to different loans. For instance, the rate announced on July 1 equals the Treasury bill rate from May plus 2.3 percent whereas the PLUS loan rate equals the May Treasury bill rate plus 3.1 percent.
Check your facts first
It is best to make sure that these formulas are correct before making the decision to consolidate student loans. You can do this easily with a little online research online or by speaking with a financial planner. If after studying current interest rates, it appears that a lower, fixed rate can be obtained by consolidating student loans, consolidating may be a good idea.
An online loan may help
Whether or not you decide that consolidating student loans is the best option for you, an online loan or cash advance is easy to obtain and can help you pay off student loans and other debt. Credit checks normally aren’t required, so people with bad credit can generally get online loans easily. However you approach repaying your student-loan debt, considered all the options, but don’t ignore the debt. Consolidating your student loans can help protect your credit rating, and in the long run, a good credit rating really pays off.