The decision to opt for student debt consolidation should be factored in on several crucial points. Financial experts often opine that it is better to steer clear of this method of debt management since (even with the smaller repayments) you end up paying much more than what you are paying on the several loans that have been consolidated into one single payment. The repayment period is generally longer in case of debt consolidation and as such you end up paying more in the long term. On the other hand, since you’re down to one single consolidated debt from several ones, it becomes easier for you to keep track of your repayment.
Let us learn more about the merits and demerits of this phenomenon. However, even before delving into further details, it’s wise to remember that even if you’re opting for consolidation, you should take due care in going through reliable Services review in order to determine which debt consolidation program you should opt for.
Merits
If you have loans with multiple lenders or creditors and it becomes difficult for you to keep track of the payments to be made by you, you can resort to consolidation that helps you bring all your debts under one umbrella loan (for which you are answerable to only one lender). Therefore it becomes easier for you to keep track of your payments.
Since the repayment period is longer, you can repay smaller amounts.
You can look forward to reinstating all your loan benefits like eligibility to apply for financial aid, deferments, etc after you have made satisfactory arrangements for loan consolidation. Actually, most of these benefits are removed once your debts are placed in default- but after opting for consolidation (i.e. when you’re placed out of default) you can look forward to the reinstatement.
There generally are no application processing fees or prepayment penalties.
The money that you’re saving up each month can be used for paying up other important dues like utility bills, rent, etc.- in short—- there is a substantial improvement of cash flow with all your debts being consolidated.
Demerits
There are chances that you might not qualify for the same deferments on your consolidated debts as those which were applicable on original loans.
If you are including Perkins loans in the consolidation then you might end up losing the chance to qualify for certain forgiveness programs.
As already mentioned above, a longer repayment period would eventually mean that you are paying up more in the long term.
Conclusion
It’s important to weigh the pros and cons carefully before opting for a consolidation program. Consolidation- it’s often opined – should be your last resort. If you’re struggling with your existing debts then you should first have a word with your bank or credit union. Find out if your family can chip in with help or not and then consider seeking the aid of consolidation.
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