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That’s why we decided to use this blog post to explain exactly what student loan consolidation is and whether or not it’s the right thing for you. How does student loan consolidation differ from the other types of debt consolidation?
By definition, consolidation means combining many loans into one single loan.
Although these loans are likely governed by the conditions enumerated in the same master promissory note, the loans themselves are individual promises representing no more than a semester or quarter term.
Therefore, when a student completes their college experience they become responsible for multiple loans spanning over the timeframe of their college experience, instead of a single loans.
If you’re a college student or recent graduate, then you’ve probably thought more about student loans and how to pay them off than you’d like.
With so much information out there, it may be difficult to figure out your best course of action.
This is because although a consolidated loan may make it easier to make monthly payments by lowering the monthly bill, because the repayment plan is often longer, the actual cost to the student will be a great deal more than they would have otherwise paid.
The act of consolidating student loans is usually a decision made by a former student who is either looking to save money from an overall lower interest rate, or to provide convenience by turning multiple monthly payments into a single and lower monthly payment than they would otherwise pay.
Unlike the single loan a person might borrow in order to make a purchase on their home, students borrowing money to finance their education are not offered one giant single loan to cover their college expenses, but are instead offered multiple smaller loans that they can option for every semester, or every quarter.
The loans, therefore, are not only different sizes but are also assigned different interest rates attached to them.
Instead of keeping track of paying back eight different loans, a student will seek out a student loan network and consolidate all of their loans into one, so that they can pay back their student loans by making one payment per month instead of many.
After consolidating, you have only one interest rate and make only one monthly payment, instead of having multiple rates and payments.