Should I consolidate student loans is a question most college graduates ask themselves. If there was a loan taken out for each semester and you were in school for 4 years, then that would be 8 separate loans with 8 separate payments. Making all of those payments can seem like a chore.
If every loan has the same interest rate and a new loan to consolidate all of them has the same or lower rate, then consolidation can simplify the payment process. This should only be done if it is the same interest rate or if the new rate is lower. If the new rate is higher, then you will end up paying more money for the convenience of paying only one payment each month rather than 8. For some individuals, it would be a fair tradeoff while for most it would not be.
It is true that 1 stamp costs less than 8 to mail the payment each month. If the payments are made with the assistance of online bill paying that is offered at most financial institutions today, there is no postage fee or charge.
When looking to boost your credit score, paying off 8 different loans simultaneously will increase your credit rating. The credit score agencies look at consolidation as a tool people use when they cannot manage their debt properly. By paying all of them off individually, your credit score will get a boost and the next loan you apply for will be at a better rate than if you had consolidated your debt.
This will only hold true as long as all of the payments are on time every month.
However, many people consolidate their student loans to increase the time they have to pay the money back. When I graduated from law school, I felt that I had to consolidate my law school loans and increase the term to 20 years. Today, I think that it was a mistake for me to do that. I should have lived more frugally and paid them off quicker.
I am not sure that there is a right answer to this question, but don't automatically think that you should consolidate student loans. See if you can pay them back without consolidating them. In the end, you will probably be able to pay them back quicker.
Did you consolidate your student loans? I would love to hear your experience in the comments below.
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