Federal student loan consolidation as debt relief: important tips

In many ways, student loans can help out someone in need of college money, who might not otherwise have the chance at an education. Many student loans allow deferment until after graduation. However, jobs aren’t always in demand right after someone gets a degree, leaving the borrower in the unfortunate situation of not being able to pay his or her loans.

Many Floridians seeking debt relief have considered consolidating their loans. Loan consolidation has the potential to let those with financial challenges get back on their feet, by combining all of their debt into a single monthly payment with one interest rate. Depending on the type of debt – such as credit card debt, a second mortgage, and vehicle loans – this can be very convenient for overwhelmed consumers. But with student loans, especially if you have more than one, it’s important to consider several factors before consolidating them.

For example, if you decide to take advantage of federal student loan consolidation, all the interest from multiple student loans will most likely be averaged and rounded up. This can end up costing you more in interest than your loans would have been separately. Additionally, having one combined loan doesn’t give you the opportunity to more quickly pay down the loan with the higher interest rate.

Before deciding to sign up for student loan consolidation, it may be helpful to consult with a bankruptcy lawyer. Ordinarily, student loans can’t be discharged through Chapter 7 bankruptcy, but an experienced bankruptcy lawyer may know of other options or programs to help people with unmanageable student loan debt.

Source: Deseret News, “Beware of the student loan consolidation temptation,” Jan Miller, April 11, 2013