Miranda Reiter, CFP®

 There is roughly $902 billion dollars of student loan debt outstanding in the United States today. According to the Consumer Finance Protection Bureau, $864 billion of that amount is comprised of federal student loan debt. If you are like most college graduates today, you have your own share of federal student loan debt that you want to get rid of – like yesterday.    

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Trust me. I know how it feels. Paying for your education years, or even decades, after graduating can seem like paying down a mini-mortgage that just won’t go away. But like with a mortgage, most people get rid of their college debt by diligently and consistently paying it down over time. However, there are many strategies that you can use to repay debt smartly and federal loan consolidation is one of them.  Here are 3 reasons why:

Scoring A Fixed Rate

Think about your current federal student loans. What is your current interest rate? Is it fixed or variable? Before considering loan consolidation, you must know the answer to these questions. Why? Because the answers will help you determine how much you’ll benefit with a consolidation. A fixed rate is great because it won’t change even though your loan may not be paid off for the next 20 years. This means that despite any crazy market downturns, you won’t have to worry about your interest rate going through the roof. And quite simply, it could translate into peace of mind and more money saved over time. 

Get New Discounts

By consolidating federal loans together, you might have access to discounts that you did not have before your loan consolidation. For example, you could be privy to a rate reduction for automating your payments or for paying your loan on time for 24 months in a row. However, I would like to offer a word of caution. Before consolidating, make sure you are not giving up any similar or better discounts with your current loan provider which may outweigh the benefits of combining your loans. 

Simplify Your Life

If you have several outstanding federal loans with different balances and pay dates, it might make your life easier to combine them all together. Furthermore, with a federal loan consolidation, you may be able to extend your payment schedule which can lower your payments and offer breathing room if your finances are already tight. 

A fixed rate, discounts, and simplicity are three reasons to consider federal student loan consolidation, but there are even more.  If you want to get smarter about paying back your federal student loans, consolidation might be a great way to do so. Keep in mind that this strategy is not for everyone, so you’ll want to understand the benefits as well as any disadvantages. Learn more about federal student loan consolidation and the many repayment options at the US Department of Education’s website.

 

Miranda Reiter is a certified financial planner and founder of She & Money Financial Planning. She helps women develop a game plan for financial success so that they can stop feeling broke, meet their goals, and live the life they truly deserve. Get her free audio training on debt elimination here.

 

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