Consolidating Stafford Student Loans

By: Evelyn Saunders

After the student loan scandal of 2007, many alumni may be looking forward to consolidating their student loans this July. July is when the variable rates change on federal student loans. Alumni may be hoping to lock in low rates, combine multiple loans and lower their monthly payment. But before you jump on the consolidation bandwagon, there are a few things to consider.

The student loan scandal made many people afraid of the student loan lenders. But, now that guidelines are in place, it is a much safer time to consider student loan consolidation. Now when you start researching which lenders to consolidate with, you are more likely to get unbiased information. Keep in mind that you still need to make the final decisions on your own. Educate yourself before you pursue consolidation.

When you consolidate your student loans, you should consider what you want to accomplish. You may want to lower your monthly payments, lower your interest rate, lower the amount of time that it will take to pay off your student loan debt, or simplify your monthly bill paying schedule.

If your goal is to lower your monthly payments, you should consider repayment terms in your decision. Consolidating your loans generally does lower your payments, but it also tempts people into extend their loan terms. This can cause you to pay more interest in the long-run, so calculate how much more you'll actually pay before you decide that this is the best option. Sometimes lowering your monthly payment by a little bit isn't worth the extra time and money that it would take to pay it off. It just depends on what is right for you. See what many different lenders have to offer so that you can make an informed decision.

There are other reasons besides lowering your payment to consolidate student loans. Let's say that you want to get a better interest rate. Keep in mind that you can't consolidate over and over, so you'll want to be sure that consolidation is the right move for you before you do it. If you have variable Stafford loans, then you need to wait and see if the rate actually goes down much. If it doesn't really move, then it's not worth wasting your consolidation option on. If you have a fixed rate Stafford loan, then you are at a fixed rate of 6.8 percent anyway and consolidating won't lower it.

Sometimes consolidating is worth it just to get your bills together in one easy payment. This can help you pay your bills on time more consistently. Just be sure that you're making the right move before you decide to consolidate your Stafford student loans.

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