Blog

3 Reasons to Consolidate Student Loan Debt

Do you have a lot of student loan debt? If you do, you’re not alone. According to Forbes, “outstanding student loan debt sits at $1.52 trillion, making it the second largest form of consumer debt trailing only mortgages.”1 If you’re facing the pressure of monthly payments on multiple loans (often from different providers and with different interest rates), you may want to consider refinancing or consolidating your loans into one. Affinity is among the financial institutions that offers consolidation, so as an Affinity member, you have access to this option and it may be something you want to discuss further with one of our representatives. But what exactly is consolidation and what can it do for you?

graduation hat piggy bank

Consolidation of student loans is when you combine various separate student loans into one loan with a single interest rate. Refinancing, which involves taking out a new loan at a more favorable rate to pay off one you have now, is a different process but has similar motives and benefits. There are three reasons to consolidate student loan debt:

  1. Keeping things simple: One definite benefit is the ability to treat your student loans as a single payment rather than having to keep track of various loans from different institutions, both public and private. Anyone who has to make monthly payments of any kind probably gets frustrated with the complexity of remembering passwords, due dates and just the fact that certain payments need to be made. This increases your chances of missing a payment or losing track of a loan entirely, making you delinquent and perhaps affecting your credit score. Replacing several loans payments with one allows you to take advantage of automatic debit, in which you’re billed automatically and hassle-free. For anyone who tends to be a bit scattered (and that’s probably most of us!), the simplicity of loan consolidation is a big relief.
  2. Lower monthly payments: Your student loan payments are likely just one of the things you have to pay every month, along with rent, utility bills and daily necessities. Consolidating or refinancing your loans allows you to adopt a plan in which you extend the term of repayment in exchange for a lower monthly payment. Though you may end up paying more in the long run due to interest accumulation, consolidation can have a positive affect on your day-to-day financial worries in the short term. And if you’re just getting started with your career or facing prolonged unemployment, that’s a trade-off you might be willing to make.
  3.  A stable (and possibly reduced) interest rate: In addition to the confusion of having to remember all your loans, you also must deal with having multiple interest rates, some high and some low, some fixed and others fluctuating. Student loan consolidation programs – like Affinity’s – can enable you to lock into a low, fixed rate so you don’t have to worry about suddenly facing an increased payment. And with a lower interest rate, you can also save more money and maybe pay off your loan more quickly.

Student loans are often necessary to pursuing your dreams. But the resulting debt can also get in the way of those same goals. Fortunately, you’re not stuck with the repayment plan you have now. Whether or not you should consolidate or refinance your student loans depends on your own unique circumstances, and it’s best to discuss the matter with a financial advisor. But if you’ve missed payments, feel overwhelmed or you’re just baffled by how complicated the whole process is, consolidation is something you should explore. 

1 Retrieved from: https://www.forbes.com/sites/lizfrazierpeck/2019/08/14/2019-student-loan-study-shows-numbers-are-still-massive-and-still-on-the-rise/#681a337d42c9

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.   - See more at: https://www.affinityfcu.com/tips-and-tools/affinity-connect-blog/2017/acronym-101-the-low-down-on-segs.aspx#sthash.HNRlWMk2.dpuf

Back to Blogs