The student debt crisis has been playing a bigger role in the political arena for at least four years in the United States. I expect it will be a major issue for political discussions with the presidential election this November.
Student loan debt has reached an alarming $1.5 trillion in this country. It doesn’t appear to be going away any time soon. Some Democratic presidential candidates hoping to appeal to Millennials state that they will fight to resolve our student debt crisis. Meanwhile, President Trump is proposing to end the student loan forgiveness program.
Any way you look at it, you’re caught in the middle. While politicians pontificate on the future of student debt, you are in over your head wondering how you are going to get out this mess.
One thing you can do that may be a simple solution is to consolidate your student loans. Let’s discuss the advantages and disadvantages of student debt consolidation.
Student Loan Consolidation Advantages
Here are three practical advantages to consolidating your student loans:
1. Get you down to one payment, one bill, and one loan provider.
Dealing with your student loan debt with one provider and one monthly payment will be much easier than managing multiple loans with different loan servicing companies. How many times did you forget to pay a bill because you couldn’t keep track of your student loans?
2. Lower your monthly payments.
If you can extend the number of months on your loan, you could lower the monthly payments. This lower monthly payment will help you pay down any other debt you have – not to mention paying your rent and grocery bill.
3. Change from a variable to a fixed interest rate.
Variable interest rates are not helpful when you are trying to manage debt. Your student loan payment fluctuates, and the increase in payment can cut into your budget. If you have variable-rate student loans, consider a student consolidation loan that has a fixed rate.
Try this free debt analyzer tool to see where you stand financially.
Student Loan Consolidation Disadvantages
As perfect as a student consolidation loan may seem, it may not be right for you. Before you apply, you need to understand why you would like to consolidate and the potential downsides of student loan consolidation. Here are two potential disadvantages to consolidation:
1. Longer repayment term.
If your new student loan extends your repayment terms, you will pay more interest over a longer period. Your goal for financial freedom will take longer to realize. This may prevent you from purchasing a home if you don’t already own one.
2. Outstanding interest will capitalize.
At the time your student loan is consolidated, any outstanding interest may be added to your principal balance. Your total outstanding student loan balance will increase, which means more interest will accrue on your loans each day.
What to Do Next
If you decided it’s time to consolidate and fix your student debt problem, DebtMD has partnered with several financial companies who specialize in student loan consolidation. Even if you are on the fence, talk to an advisor who can help you decide if consolidation is right for you.