As a student you may have taken out various student loans but are unable to pay them now. If debt management has become a problem, then you can opt for student educational loan consolidation. In this case you take out a loan that pays off all your multiple student loans and thus, you need to pay only towards the student educational loan rather than paying your multiple creditors. It also offers lower rates of interest as compared to your current loans and thus, reduces the total amount that you needed to pay.
This process surely has many advantages, but it also has many disadvantages. Some of the disadvantages of student educational loan consolidation are as follows.
1. Can not predict future rates: When you opt for an educational student consolidation loan you are not sure what the interest rates will be in future. As you can not predict these future rates you may end up paying much more than what you were supposed to pay originally. The interest rates in future may fall, and you may pay more than necessary. However, those rates may rise as well and in that case you benefit. Predicting the future is impossible and thus, consolidating your student loans could not be beneficial at all.
2. Loss of discharge benefits: One of the top disadvantages of the student educational loan consolidation is that although you have to pay a lower rate of interest in case of loan consolidation but still the amount that you save as interests can be eaten up. This is because it may so happen that your discharge benefits get lost.
3. Loss of borrower’s benefits: The loans that you have, that are not consolidated provide you with certain borrower’s benefits. These benefits range from interest rate discounts and also some rebates. You should also consider that these benefits may compensate for the lower interest rates that consolidation provides you. Thus, it may be better for you to stick to your current loans and not opt for consolidation as it takes away all the borrower benefits.
Considering these disadvantages and your financial scenario, you should decide what you must opt for. There are surely many advantages of educational loan consolidation; however, the disadvantages can not be disregarded.