Student loans

Student loans
Produced by: Quita Jackson

It seems a lot of people do not understand student loan consolidation. Mortgage Originator Dean Wegner says there is the good, the bad and the ugly on Student Loans. They are the most common extreme "lates" that many people are totally unaware of. Below are the advantages and disadvantages of consolidation.

ADVANTAGES
Reduces your monthly payment up to 60% - If you are in need of more money each month consolidating will reduce your payment, but increase the life of the loan. If you are financially desperate consolidating will increase your cash flow each month.

Simplifies your finances by creating one low monthly payment - When a lender consolidates your loans they combine all outstanding student debt into one loan. This means you only have to make one payment to one lender.

Locks in your interest rate - If interest rates are historically low you must consolidate your student loans to keep the low interest rates.

Interest rate reductions - Most lenders offer interest rate reductions for consecutive on-time payments and monthly direct withdrawal.

Improves your credit rating - If you pay your bills on time your credit score will go up. A good credit score improves you chances for getting a job, house, apartment, and much more.

Flexible repayment plans - There are many different options for repaying your student loans based upon your financial situation. See our section on Repayment Plans

Saves you money - Assuming you get a lower interest rate and pay off your loan in ten years federal student loan consolidation will save you money. See our section on How to Get the Lowest Interest Rate for more information.

DISADVANTAGES
Longer repayment term - before you consolidate your loan the repayment term is usually 10 years. After you consolidate the term usually changes to 30 years.

Increasing the time it takes to pay back your loan will increase the amount of interest you pay over the life of the loan. For example, if you have a $30,000 loan with a 5% interest rate and you pay it off in 10 years versus 30 years you will save yourself nearly $20,000 dollars.

Lose subsidy benefits for Perkins Loans - If you have a Perkins loan that is still in the grace period or deferment you will lose subsidy benefits if you consolidate.

Unpredictable interest rates - Before you consolidate your student loans you have a variable interest rate that will change as major bank interest rates fluctuate. If interest rates are not historically low then you may want to wait until they drop. Once you consolidate your loans you will have a fixed interest rate that will never change. If you locked in your interest rate at a high number you will end up paying thousands more than if you would have waited for interest rates to come down.

If you would like to contact Dean Wegner you can email him at dean@teamdean.com