Consolidating loans in default
You may have been wondering, “Should I consolidate my student loans? Here are a few of the benefits of consolidating your loans. This If rates have dropped since you originally borrowed your loans, or if your financial situation and credit score have improved, lowering your interest rate could save you a decent chunk of change — and may also allow you to pay your loans off faster.Change your variable interest rate loan to a fixed-rate loan.
However, most private lenders will allow you to consolidate federal and private loans.While federal student loans are fixed-rate, private loans can be either fixed-rate or variable.At first glance, variable rates may look appealingly low — 2.25 percent or 3.25 percent — compared to fixed-rate loans that ask for 6–7 percent interest.You can check out federal loan repayment options here or contact your lender directly to find out the options for private loans.Predatory lenders love to court people who are having financial difficulty because they’re more likely to jump at too-good-to-be-true offers without vetting them.If you extend your repayment terms from 10 years to 20 years in order to get a lower monthly payment, you can wind up paying tens of thousands of extra dollars in interest over that longer time period. Depending on the lender that you select, you may or may not be charged an origination fee of anywhere up to 2 percent.
If you refinance $50,000 in student loans and your bank charges an origination fee of 1 percent, you’re looking at paying an additional $500.
This releases the co-signer from any risks and gives him or her a better opportunity to qualify for their own home, auto or other financing.
Some banks offer consolidations with co-signer releases.
The most important aspect in making this decision, as with any financial decision, is being aware of all of your options.
Weigh the pros and cons carefully, and remember there’s no single “right” answer.
Some spend more money on college debt than they pay for groceries, utilities, or in some cases, even rent.