Reconsolidating a student loan


23-Oct-2015 12:48

If you need more cash in your pocket right now, consolidation can help by extending the life of your loan and thus trimming your monthly payments -- although the length of your repayment terms will depend on the amount of debt you have, and you may not be able to extend at all.

But if interest rates are low you can lock in long-term savings, since less of your money will go to interest.

Private consolidation lenders, on the other hand, are not subject to those terms and may include variable rates and any number of fees.

What's more, some benefits of a federal consolidation loan, such as interest subsidies on deferred loans, are not available on private loans.

(There are no prepayment penalties for student consolidation loans.)If you have only a couple more years or a few thousand more dollars to go till you pay off your student loans, consolidation is probably more hassle than it's worth.

To a college grad swamped with multiple student loans that have come due, loan consolidation is an enticing option.

When you consolidate, a lending institution pays off your existing balances and replaces them with a new, consolidated loan.

A consolidation loan is just what it sounds like: You can take two or more outstanding loans and refinance them into one.As with the Stafford Loans, there are both Direct and FFEL consolidation programs.You may also have access to a new repayment schedule (like an income-contingent plan) that's a little easier on your wallet.If you don't care about the extra cash and just want a consolidation for the simplicity of a single monthly payment, you can use any money you save to pay down the principal.

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Yet despite the appeal -- and its popularity -- student loan consolidation isn't for everyone.Here are some frequently asked questions and answers that may help determine if it's the right move for you.