American Consumer Credit Counseling Explains How to Utilize Student Loan Consolidation

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ACCC explains the pros and cons of considering student loan consolidation

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While consolidating student loans can make the repayment process more manageable by combining the existing debt into a single loan, it’s important that borrowers understand the pros and cons before making a decision.

After graduation, many people find themselves with multiple federal student loans to pay off. Some graduates may consider consolidation, which combines the existing debt into a single loan. This can make repayment easier, as borrowers only have to make a single payment, rather than a payment on each type of loan.

“Once students graduate and leave college, the daunting task of paying off student loans begins,” said Steve Trumble, President, and CEO of American Consumer Credit Counseling. “While consolidating student loans can make the repayment process more manageable by combining the existing debt into a single loan, it’s important that borrowers understand the pros and cons before making a decision.”

According to Student Loan Hero, in 2017 the average student loan debt was $39,400, a six percent increase from 2016. A total of 44.2 million Americans have student loan debt in the U.S., adding up to about $1.48 trillion. The average student loan monthly payment is $351 and the delinquency rate is 11 percent.

ACCC provides the pros and cons of student loan consolidation.

PROS OF STUDENT LOAN CONSOLIDATION
Student loan consolidation can lower your monthly payments by increasing the amount of time you have to pay back the loan, while also giving you access to other student loan repayment options. For those with variable interest rates, consolidating to a Direct Consolidation Loan will convert the interest to a fixed interest rate for the life of the loan, based on the weighted average of the interest rates on the consolidated loans. This fixed rate can provide stability and a lower monthly payment.

Debt consolidation companies argue that borrowing money at a low interest rate to pay off loans or credit cards at a higher interest rate can save you money, or help you pay off the debt sooner. Other pros include having fewer payments to make each month, and less likelihood that you'll be late on payments.

CONS OF STUDENT LOAN CONSOLIDATION
However, there are cons to consolidation. If your previous loans had any benefits, like interest rate discounts, rebates, or forgiveness, you may lose those benefits in the loan consolidation process. Consolidated loans can’t be unconsolidated because, after consolidation, the individual loans are considered “paid off” and no longer exist.

Consolidation can take place any time after the student has left school, graduated, or dropped below half-time enrollment. However, you should not consolidate your loans without carefully examining the pros and cons listed above. Depending on the terms of your new loan, it's possible you can actually end up paying more in interest over the life of the loan, or that you'll end up deeper in debt.

ACCC is a 501(c)3 organization that provides free credit counseling, bankruptcy counseling, and housing counseling to consumers nationwide in need of financial literacy education and money management. For more information, contact ACCC:

  •     For credit counseling, and student loan counseling call 800-769-3571
  •     For bankruptcy counseling, call 866-826-6924
  •     For housing counseling, call 866-826-7180
  •     Or visit us online at ConsumerCredit.com

About American Consumer Credit Counseling
American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling and financial education concerning debt solutions. In order to help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to ConsumerCredit.com or visit http://www.consumercredit.com/financial-education.aspx

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