Student Loans Consolidation Advice: How Much Does it Cost to Buy Time?

The grace period for paying off student loans after finishing college, if you're lucky enough to have one, is very short. Soon after getting your degree, you will be testing the waters in the job market, and when those student loan payments start coming in you may be looking for student loans consolidation advice.

Consolidation of student loans can have certain advantages. It is generally recommended that you consolidate early if you're planning on consolidating, because there's no point in consolidating when you're nearly paid off, extending your payment time, and not seeing the benefits of having lower payments when you're recently starting your career. In fact, most lenders will not consolidate student loans if your total debts do not exceed a certain number, $20,000 or $30,000, for example.

Student loan interest rates are variable, so you may choose to consolidate just to lock your interest rate, although that interest rate will generally be higher than your current interest rates. The Department of Education offers loan consolidation at an interest rate equal to the weighted average of the interest rates of your existing loans.

The option of consolidation can be held in case of an emergency. If you can't pay a student loan, you can request a deferment or forbearance, but it may not be granted to you (and can depend on factors such as extreme economic hardship or unemployment) and can come with its own consequences, such as having to capitalize interest, which means the interest during your deferment would be added to the principle and you'll end up paying interest on interest.

A default on a student loan can lead to all the same problems as defaulting on a bank loan or mortgage, or worse in some cases. A default will be reflected on your credit history, and until it is paid back, you can be denied Social Security benefits, your paycheck can be docked, and your tax returns can be withheld. If you have a professional license and you default on a federal student loan, you can have your license suspended or even revoked, and you will have to make up the default, plus expenses, without being able to practice your profession.