Pros & Cons of Student Consolidation Loans

The benefits and the downfalls of consolidation loans can be honestly argued from either side. The major downfall of consolidation loans is the fact that, over the life of the loan, most students end up paying more interest than if they were to keep the original loan. If this is the case, then why would anyone want a consolidation loan? Convenience is the major reason why most loan holders choose to roll over their balances to a consolidation lender. Many students come out of school with a number of different students loans, each of which must be paid separately. Consolidation loans simplify this process by rolling the amount owed into one lump sum.

The other reason many students choose to go with a consolidation loan is because these types of lenders typically cut the monthly payment owed by the loan holder dramatically. Some consolidation lenders offer to cut monthly payments by as much as 50%. For some students, this is the only way they can afford to live and pay back their student loans at the same time. The downside of this part of consolidation loans is that the interest is still building. So, if the life of a student loan is changed from a 15-year loan to a 30-year loan, there are 15 more years the lender can possibly collect interest. That can add up to tens of thousands of dollars extra that the loan holder will pay over the life of the loan.