Imagine a graduation ceremony with family and friends. The happy student takes a few precious steps across a stage, then accepts a diploma while smiling for the camera. The student becomes a bone-fie college graduate; the last thing on his mind is how he is going to repay his student loans when they come due in six months. However, like it or not, those bills come due quickly and are often harder to pay than what was originally thought.
Unfortunately, this is an all too common scenario that repeats itself at the end of every semester. Despite loan counseling and student loan workshops, students are often ill-prepared to handle the amount of debt that will come due once they are no longer enrolled in college. Who can blame them? While in college, students are focused on projects and exams, not some hypothetical, distant future. No one imagines themselves working part-time six months after graduation because the job economy is so competitive, they can't get a position within their chosen field - let alone that they will be unable to repay their loans. In all reality, this happens quite often. Though there is little to be done about the job market, one can consolidate private student loans in order to ease the financial drain the repayment process will cause.
When to Consolidate Private Student Loans
Unlike federal student loans, private loans carry variable interest rates that can produce some pretty hefty hikes in payment amounts if the rates begin to fluctuate. Most students have several different loans; an individual that will consolidate private student loans will immediately begin to save money but the timing is not the same for everybody.
If the borrower had a limited credit history when the loans were originated, it is probably best to make regular payments for the first few years in order to improve his credit score. As everyone knows, the higher the credit score an individual can obtain, the better interest rates and incentives he is likely to receive from lenders - this is no different in regards to consolidating private student loans.
Also, consider consolidation as a way to become the sole borrower on the account. If the loan required a co-signer, he will be removed upon consolidation and thus no longer be liable for any part of the account. This is usually only possible after two to four years of making regularly scheduled payments.
Advantages in Consolidating
By consolidating your loans, the borrower can:
1. Receive a lower interest rate - most lenders offer automatic payment and relationship discounts; these discounts may appear minimal at first, but often add up to big savings over the life of the loan.
2. Have an option of rates - the borrower may choose a fixed or variable rate in order to receive the most competitive APR for their unique situation.
3. Maintain peace of mind - if an individual has multiple student loans, consolidating into one monthly payment will simplify his finances and just make life easier.
Most lenders also offer such services as loan specialists, high-limit consolidations, and online account access. Research each lender to determine their specific benefits and conditions.
Consolidating private student loans can last up to sixty days and is a lengthy, time-consuming project. However, for most borrowers consolidating is an excellent step towards financial independence.
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