Is it a Smart Move to Consolidate Your College Loans?

Paying back student loans right out of college can be tough. This is all the more the case in this economic environment. The question for many recent graduates is should they go ahead and consolidate their student loans, to wit, is it is a smart move?

Graduation should be one of the happiest days of your life. In truth, it is. Most of us know, however, that reality lurks on the other side of that magical day and reality can really bite. The first bite often comes when that first college loan student payment invoice comes. Talk about a wake up call!

The simple fact is most people have a hard time meeting their loan obligations when the get out of school. The pay in your first job usually isn't that great. Ironically, you loans are usually at their highest point as far as payments go. This double whammy can really wipe you out unless you carefully consider your options and make some smart choices.

Consolidating college loans makes sense in a lot of cases. There are two primary reasons. First, you are going to cut your interest rate. The current economy is such that interest rates are as low as we are probably every going to see them. By consolidating your loans, you can lock in a rate of around five percent. This will save you tens or hundreds of thousands of dollars in interest over the life of the loan.

Second, the process of consolidating will spread out your repayment period. This means more payments, but smaller payment. This is a critical point for most recent graduates who get out of school with little extra cash. Slashing your monthly payment by $200 can make for a world of difference in your financial situation.

There is a definite downside to consolidating. The longer you pay, the more you are going to pay because interest is just going to build up and up and up. To avoid this, put yourself on a payment plan where you pay more as you start earning more money. You must be disciplined. Many lenders will let you pay more to a certain part of your loan. If you can slice your loan into six or seven parts, you can make things easier by paying off just certain debts first to feel like you are making progress.

Consolidating college loans is a pretty smart move in the current economic environment. With things being up in the air, the idea of hording as much cash as you can is a pretty good one.