Private School Loan Consolidation – Pros and Cons

As the cost of college education increases, many students and parents turn to college student loans to help tackle the cost. Covering the cost of tuition, dorms, books, transportation, food and other expenses is often times a difficult challenge for students to overcome.

As students take on financial aid in the form of student loans, it’s not uncommon for a single student to have multiple loans as they move closer to graduation. Payment becomes due after a six to nine month grace period which begins at graduation.

Consolidation can be a solution that reduces the financial stress of managing multiple student loans as they come due. Private school loan consolidation is the process of combining multiple private student loans (as opposed to federal) into a single consolidated loan.

The main purpose of obtaining a private school loan consolidation is to lower monthly payments, reduce the interest rate and extend the terms of re-payment. Re-payment terms are normally from ten to thirty years. A fixed interest rate can also be obtained which is advantageous. If a student has all federal loans, they should not use private consolidation as it would result is a loss of the benefits that come with federal programs.

If a student has borrowed more than $5000 in private loans or if the existing student loan debt exceeds 8% of the student’s income, they should consider consolidation.

Factors to be considered before making a final decision on consolidation include:

- Lenders

- Interest rates

- Total loan payments

- Credit history

- Payments remaining on original loans

For some students, the ease of managing a single payment is the most significant benefit of private school loan consolidation. While it is true that loan consolidation will reduce monthly payments, it will also lengthen the terms of re-payment, thereby increasing the overall amount of interest paid over the life of the loan.

The student must decide which works best for him/her – lower payments over a longer period of time or getting out of debt earlier by paying off the original loans on time.

Sam Fowler is an internet consultant and web content writer. For more information on student loan consolidation, go to Private Loan Consolidation.