Disadvantages of consolidating student loans

The average college graduate in 2016, who took out student loans, owes ,172, a 6% increase from 2015.That is a sizeable, unwelcome gift to take home from school and it’s important to know how to minimize the damage.But, as Mark Kantrowitz warns on USA TODAY, “variable rates have nowhere to go but up.” If you sign up for that low, low rate now, you risk committing yourself to rising rates for years to come. Typical student loan repayment terms range from 5 to 20 years.By extending the repayment term, you can significantly reduce the amount of money you’re required to pay each month.While loan consolidation does not reduce your remaining debt, it makes it more manageable to make the monthly payment.Loan consolidation can even be used for a single student loan.

Under certain circumstances, federally backed student loans – such as Direct Subsidized Loans and Federal Perkins Loans – can be discharged or forgiven.If you continue borrowing for graduate school, it’s easy to add another 4-6 lenders to the mix.Each one of these student loans has its own due dates, interest rates and payment amounts.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.

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