Pros and cons of consolidating school loans

Parents generally have to pay a larger chunk of their discretionary income with this plan, but these payments can still be less than the other options.

This is helpful if you hope to free up some extra cash flow each month.

pros and cons of consolidating school loans-61

Some federal loans, such as Stafford loans, have subsidized interest benefits that can survive a consolidation. The loss of subsidized benefits can demonstrably impact the amount of interest that you pay on a debt.

Make sure you understand what you are giving up before consolidating.

ICR caps monthly student loan payments at 20 percent of the borrower’s discretionary income.

Keep in mind that discretionary income is usually less than gross income earned.

You may end up paying more in total interest after you consolidate your student loan debts.

You could lose some of the benefits from your subsidized student loans.As with any consolidation loan, the net effect of your new student loan may be that you end up paying more in interest (or even more in principal) when all is said and done.This is especially true when you are extending the repayment length on the debt.Your grace period on some loans could end prematurely, or you may end up consolidating at the wrong time – too early or too late.Not all student loan debts can be consolidated, although most federal loans can.Many students graduate with more than one student loan, and some graduate with as many as a dozen or more.