College can be expensive. From dealing with the massive amount of tuition to the extra money you have to dish out for textbooks, your bill can be pretty big. Luckily there are plenty of loan options you can pick from to assist you with funding your college education, such as federal programs and private loans from the bank. When you are looking at these options, you should start to consider how you will be paying everything back.
These loans typically add up to be thousands of dollars, so chances are, you'll be paying them back for a number of years. There are several types of repayment plans you can choose from, and one option is consolidating all of them. This involves taking your loans and combining them into one massive debt for which you will make one payment each month. Before you pick this alternative, you should know the advantages and disadvantages:
Making only one payment each month can be a lot easier as opposed to making several, and consolidated loans can offer you a number of payment options. After college, finances may be a little tight, which is why there is an income-based repayment plan. This will set a cap for your repayments based on your income and personal situation.
You can also choose a standard monthly repayment plan, which can potentially lower your payments. With individual loans, you will have a shorter time frame to pay back your debt, depending on who your lender is. Consolidated loans give you more time, which in turn will lower the amount you have to pay every month.
Even though consolidated loans offer a number of positives, there are still some caveats. With your individual loans, you will be given an interest rate for each one. When you decide to consolidate your loans, you will have one set interest rate. This can be problematic if you are stuck with a high one, especially if rates are starting to lower after you already secured one. It is important to make your payments on time, because if you forget, you will be charged a late fee and risk getting a higher interest rate.
You also may be missing out on some perks for your individual loans if you consolidate. In some instances, a lender may cut down your interest rate if you pay on time, and others might offer you flexible repayment benefits, which would not necessarily be available for consolidated loans.