Is student loan consolidation right for you?

Blue Water Credit is proud to announce we’ve been approved to provide student loan assistance.  We can now help you explore all of your options, including student loan consolidation, rehabilitation, and even possible forgiveness. 

Is student loan consolidation right for you?

Recent reports claim that 7 out of 10 college graduates end up with student loans, with an average of almost $30,000 in debt.  Many of them struggle to even make the monthly payments, holding them back from saving, paying off credit cards, or buying a home.  But thanks to new legislation, there is help.  You may be eligible to consolidate your student loans, rehabilitate delinquent loans to get back in good standing, or even possibly have your loans forgiven.

So how do you know if student loan consolidation is the best option? 

If you’re making payments on several student loans every month, whether it’s three or five or more, consolidation is worth looking into.  It will combine all of your loans into one larger loan, reducing interest rates and simplifying with one, low payment – saving you money every month and also helping you pay off your loans faster. 

Although student loan consolidation is a great option for many people, there are some advantages and disadvantages to be aware of.
By wrapping all of your smaller loans into one big loan, with a lower, fixed interest rate, your monthly payments should go down.  You’ll only have to make one simple payment every month.

Although consolidation may reduce your monthly payment significantly, be aware that you’ll probably be paying a lot longer.  There are many different kinds of loans and repayment options, but most Federal student loans originate with a 10-year repayment term.  Through consolidation, that period may be stretched to 15 or even 30 years.  So even though your monthly payment may be far less, realize that you could be paying longer. 

Another advantage of consolidation is to fix interest rates.  In the past, most student loans were based on variable rates that could change every year, usually July 1.  By consolidating, you will be able to lock in a fixed interest rate over the whole term of the loan while rates are currently low.  That stability could save you a lot of money in the future when rates fluctuate higher.

Of course, lowering your interest rates is a key goal of consolidation.  By calculating your weighted average (interest rates and loan amounts) we can determine your blended rate, or true rate.  From there, we’ll compare to a new consolidated interest rate to make sure you save money. 

So when is consolidation not the best option?

Like we stated earlier, your monthly payment will go down when you change a 10-year payment term to 15 or 30-years.  But it’s important to realize that the grand total you end up paying will be higher because the loan is spread out so long (and interest applies for longer,) even though your monthly payment is much lower.

You also don’t want to lock in a fixed interest rate when rates are declining, because you may leave money on the table.

Some student loans also offer perks  - like reduced interest rates for timely payments and flexible payment options (especially with PLUS loans.) 

What's the next step?

So consider all of these factors before deciding if student loan consolidation is right for you.  Our new service allows us to explore all of these options with you – including if you’re eligible for loan forgiveness, or consolidating into a lower payment every month.  Contact us for a free evaluation and to see if you're eligible.