11.05.09 | Why Federal Loan Consolidation is Wrong for You
Consolidation is not always the right move for students, yet they do it anyway. I believe the reason for this is because many students assume consolidation is just part of the financial aid process; that consolidation is the final stop on their debt filled journey. The truth, however, is that consolidation is not for everyone. Here are a few reasons why you should turn your nose up at consolidation.
1. You can afford your monthly student loan payment just fine thank you very much. Consolidation is used as a debt management tool to extend out your repayment terms and minimize your monthly payment, but in the process you actually end up paying back more than you owe. Who wants that?
2. Sometimes borrowers will consolidate because they want to turn their low variable rate into a fixed one, but if your loans are already fixed there is no point. All federal loans disbursed after 7/1/06 are already fixed and can not be lowered.
3. You may have better borrower benefits with your current lender than with your consolidated one. Ask your current lender what benefits you have now compared to what you will have if you consolidate. Examples include: ACH rate reduction, rate reduction after 36 consecutive months of on time payments.
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