Consolidating student loans and forbearance
For example, the Pay As You Earn plan offers forgiveness of any remaining balance after 20 years of on-time payments.So, if you've already made several years' worth of payments under the plan, you'd effectively be starting the clock over.If you use a federal direct consolidation loan, a weighted average of your loans' interest rates will be taken, and then adjusted upward by 0.125%.Although it's a small difference, it's important to be aware that you'll pay slightly more interest by consolidating.In other words, if you just graduated and apply for a consolidation loan, you need to be prepared to start making payments much sooner.When you consolidate your loans, your loan repayment term starts again, or could get even longer.Consolidating your student loans can seem like an attractive idea.
These loans have interest rates ranging from 5.75% to 6.75%.
Many borrowers are attracted to consolidating because it often translates into a lower monthly payment.
However, you'll end up paying your loans for a longer period of time, especially if you've already been paying on your loans for some time.
However, student loan consolidation has its drawbacks as well and isn't a smart move for everybody.
Here are 7 reasons why you may be better off leaving your student loans as they are.
If you apply for a consolidation loan with a private lender, your new interest rate will be based on factors such as your credit history, repayment term length, and your lender's currently available interest rates.