Why is student loan consolidation an advantageous option?

STUDENT loan consolidation is the combining of two or more student loans into a single loan with a single monthly repayment. US citizens take student loans to wholly or partly finance their education

The loans are taken during the student-years and repaid in monthly installments once the debtor starts earning. Student loans are of two types: federal, and private. Federal student loans are those whose repayment is guaranteed by the federal government. If the debtor, for any reason, fails to honor repayment commitments, the federal government steps in and makes the payment to the lender, usually a bank, and recovers the money from the debtor.

Given this guarantee, federal student loans are easier to consolidate. Private loans, on the other hand, are given to students without any state guarantee, i.e., at the lender’s risk. Consolidation of private student loans therefore involves more stringent checks on the debtor’s creditworthiness and is entirely at the discretion of the consolidator. Let’s now look at why student loan consolidation is an advantageous option.

Lower monthly repayments

The existence of student loans is fundamentally a public acknowledgement of the importance of education. The availability of student loans is an endorsement of the principle that financial constraints must not to be allowed to stunt the education of any deserving American.

However, it happens in most cases that what begins as a single loan for a single educational course adds up to two or more loans as education progresses and the student wants to take up further or higher studies. In such scenarios, the debtor is burdened with two, three or more loans with each loan being treated separately. Student loan consolidation does away with such multiplicity of loans and clubs them into a single loan with a single monthly repayment.

Advantages of the Student Loan

The bottom-line benefit of student loan consolidation is: economy, hence better management of money. If the facility of student loans confirms public acknowledgement of the need for an educated society, the option of student loan consolidation is further indication of the society’s willingness to minimize the impact of loan repayments on the normal life of the ex-student.

There can therefore be no legal or moral justification not to consolidate student loans, especially if the loans are federal in nature. US citizens should make maximum use of this facility, the like of which does not exist in many countries of the world.

More cash in hand

The shrinking of two or more installments into a single installment usually results in lower monthly payouts. This enables the debtor, now no longer a student, to manage his or her finances more efficiently and have greater cash in hand for the new expenses that become necessary at the start of one’s career. These new expenses could include payments against mortgage, car, vacations, and so on. In case the debtor decides to start family life, the extra cash in hand comes handy.