Student debt consolidation loans are a method of simplifying finances. Instead of making payments on a number of different loans, the borrower makes a single, affordable monthly repayment to pay for their college education.

Advantages of Student Debt Consolidation Loans

• Reduce monthly repayments. A combination of an extended term and lower interest rates help to reduce the amount paid each month.
• Lower student loan interest rates. The rate of interest is likely to be lower. Consolidating student debt with a loan reduces the cumulative amount of interest paid provided that the term is kept the same.
• No creditor contact. Those who have been receiving calls from creditors due to nonpayment will find that student debt consolidation loans bring some welcome debt relief.
• Money management. Consolidating student debt and other liabilities will help to simplify finances and prevent additional charges. This provides genuine peace of mind.
• Consistent payments. Turning variable rate debt into a loan at a fixed rate of interest means that the borrower knows precisely how much will be needed to repay debt each month.
• Interest payments. If the government has been paying the interest on an existing loan, this continues following consolidation.
• Flexibility. It is possible to consolidate one or more loans- they don't all need to be combined.

Disadvantages of Student Debt Consolidation Loans

• Extension of the loan term. Whilst extending the term of a loan helps to reduce monthly repayments, it not only prolongs the debt, but more interest will be paid over the full term.
• Spend more. Reducing monthly repayments by consolidating debt with a student loan could give the borrower a false sense of security. This may lead to unpaid credit card debt, car loans and other sources of borrowing being taken out.
• Poor credit history. A borrower who has experienced adverse credit subsequent to taking out the original loan may find that student loan interest rates are higher on the new borrowing source.
• Debt forgiveness. Private loans won't qualify for debt forgiveness programs in the same way as they will from consolidated federal loans from the government.
• Consolidating debt together. Those who consolidate debt as a married couple will be jointly liable for debt repayments should they later divorce.

Whilst student debt consolidation loans provide an excellent opportunity to improve affordability, extending the borrowing term will increase the cumulative amount of interest paid. There are other ways to improve finances, including paying off student debt and loan forgiveness programs.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

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