Debt Consolidation for Students

Multiple student loan payments at varying interest rates may be confusing and inconvenient, to say the least. If you're a recent college graduate, it's worthwhile to look at a debt consolidation loan.

The joy of receiving your hard earned college diploma may quickly be replaced with stress and confusion once your student loan bills start arriving in the mail. If you've accumulated several loans through different lenders, it may be smart to consolidate them.

Choice is yours

The rising cost of a higher education has increased the use of student loans over the years. If you've completed college in the past few months, it's likely that chunks of your new paycheck are going out every 30 days to cover the student loans that you've taken out during the last few years. You may not be aware that the United States Department of Education offers a student debt consolidation loan program. It's easy to qualify for the loan, and it offers many benefits to the borrower. Here are a few ways such debt consolidation may help you:

• You'll make one monthly payment. This alone can be helpful if you're paying multiple lenders with different due dates. Keeping track can be confusing.
• Your interest rate (and monthly payment) may be lower. The Department of Education calculates your consolidated interest rate by determining your current average rate and raising it to the nearest 1/8 of 1 percent.

Research, research, research

Like with any other loan, you should do your homework before jumping in with both feet. While debt consolidation can sound like the perfect deal, it's important to read all documents thoroughly, and do some numbers crunching before signing on the dotted line.

If you have only one or two loan payments, for example, and you have no trouble paying them, it may not benefit you to consolidate. Determine the consolidated interest rate to see if it's as attractive as the rates you currently have on the loans you hold. Also, look at the loan terms carefully. The longer you take to pay off your student loans, the more money you'll be spending in interest, which quickly adds up to more money spent over the life of the loan. Compare the total amount you'll spend in each scenario to determine whether consolidating is a smart money management decision.

The last thing you need once you've graduated and launched a career is for your credit report to be damaged because it was hard for you to keep track of several student loans. If it's early enough in the life of your current indebtedness, a student consolidation loan may be a wise choice that's easy on your budget as well as your lifestyle.