by Ryan Foley

Created on: October 18, 2008   Last Updated: October 28, 2008

You have put four years of hard work or more into your education and now venture into the work market. One problem exists: that large amount of debt you accrued while attending your accredited university. Should you consolidate a loan in this instance? Let's weigh the pros and cons.

It boils down to the timeframe. When did you take out these loans? If it was before July 1st, 2006, then loan consolidation would be a great option. The reason being is because before this date, interest rates were variable; meaning, they could rise up or down depending on the economy. By consolidating a variable rate you have guaranteed a fixed interest rate which will not go up in the duration of your repayment.

If you received a loan after this date, your rate is already fixed so there is little which can be done with that. However, in both options, loan compacting puts your loans into one monthly payment, instead of having to stress about six or more payments from multiple loans.

Another factor to take into consideration before embarking on your decision is whether you have federal or private creditors. If the lender was federal, you have the option of an extended repayment plan coupled with the consolidation. However, keep in mind that by exercising this means you'll be paying more because it goes beyond what your scheduled duration of repayment was. Other payment options given are Graduate Repayment plans-beginning with a low monthly payment and raising it every two years-and an income sensitive plan which directly relates your repayment to your total monthly income. Most federal lenders are identified by Stafford or Perkins loans labeled directly at the top of a statement. If you have a private creditor they may exercise these same repayment options but are under no obligation to. It is best to communicate directly with your private lender.

If nearing the end of paying off all of your debt, consolidation is not something worth looking into There are some good sources to turn to for more options and advice leading you in the right direction also. Contact and ask a local Consumer Credit Bureau representative in your area. One can also use the Student Loan Borrower Assistance Program to help them better weigh their options.

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