The Reasons Against Student Loan Consolidation

In a previous post, we mentioned all of the positives that can come out of loan consolidation. Truly, it is a program that can be very beneficial. However, we did not mention some of the caveats that loan consolidation can entail. Now, all of these are not awful things that can happen, there’s no magic fee that appears and costs you $10,000 but there’s some things to be aware of. Here’s some of the downsides of loan consolidation.

More Money

When it comes to student loan consolidation this is the clear cut biggest disadvantage. By tying up all of your student loans into one large one, it’s unlikely you will be able to afford a minimum monthly payment that would be set in a 10 year standard repayment plan. Loan consolidation will extend this period and you will be paying much more interest than you were before.

While in the long term you will end up spending much more money due to interest, it’s nice to be able to have just one payment that is affordable. It just comes at a price. That’s the key disadvantage here.

You May Be Losing Benefits

While you can still get a new deferment option through loan consolidation, you may lose other benefits in return. Loan forgiveness may be thrown out of the window as well as cancellation. Say for example that you are working in public service. If after 10 years your individual loans can be forgiven but you consolidate them in the second year, then you can no longer achieve this option. It provides a lower payment each month but it is something to think about before pulling the trigger.

Other than that, there really aren’t many negative benefits to loan consolidation, especially if you really need it. Just make sure to always carefully examine your options before making a final decision because it is not reversible.

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