You hear a lot about the benefits of student loan consolidation: one monthly payment, longer repayment terms, lower monthly payments, alternative repayment plans…the list goes on and on. But, what are the disadvantages of consolidating your student loans? Are there any?

As with as financial transaction, there are always pros and cons to every option. Now that a few of the pros have been listed, it is time to take a look at some of the drawbacks to refinancing your student loan debt.

The first drawback and probably the most significant drawback of consolidating your student loans is that by extending your repayment period, you are increasing the amount of money you are having to pay for your education. For example, let’s say you borrowed $5,000 to help you pay for your higher education expenses. If you repaid the loan over 5 years at 5%, you will pay $5661.60 at a rate of $94.36 per month. However that same loan paid over 10 years will cost you $6363.60. Of course, your monthly payment will only be $54 per month, but you will pay an additional $702 over the life of the loan.

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The next drawback is that if you consolidate your loan, even under the federal Direct Consolidation Loan program, you lose things like interest rate discounts for on time payments, income driven repayment plan options, principle rebates, loan cancellation options and more. These options are only available to those who have not consolidated their loans under any program.

And, speaking of federal student loan benefits, if you are having a short term problem repaying your federal student loans, you can ask for a deferment or a forbearance that can offer you short term relief from your payments while you work through your financial issues rather than consolidating. This preserves your student loan benefits while temporarily giving you relief from the burden of repayment.

It is important to mention that federal student loans can be consolidated one of two ways. The first option is the Direct Consolidation Loan option. This is a federal consolidation loan that is sponsored by the U.S. Department of Education and has the same benefits as federally sponsored student loans. You can also consolidate these loans using a private lending service provider, but you lose all benefits associated with having federal student loans when you do this.

You won’t be eligible for student loan consolidation until after you graduate, which is fine for most people since they don’t give a thought about repayment until after they graduate. However, for those who are trying to repay interest for their unsubsidized loans while they are in school, you won’t be able to apply for consolidation until after you graduate or leave school.

One other note, you cannot consolidate defaulted loans. Your student loans have to be in good standing before you will be eligible to consolidate. This means making up late payments and taking care of outstanding obligations before applying.

For more information,Please visit https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation
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