Consulting a professional always proves to be beneficial when dealing with sensitive issues such as loan consolidation, especially when you know that it might stick with you for a very long time.. Hence, our team decided to share our experience for those who want to get intimate with their decision to consolidate their student loans.
Why Should You Consolidate?
In short, you should consolidate your loans because:
- A good credit score is not a pre-requisite to qualification;
- It reduces your interest rate and monthly payments;
- It fixates the interest rate for the entirety of the loan term;
- It lumps multiple payments into a single monthly payment;
- It offers flexible payments during hard times.
The result of consolidation is that you can easily predict your payment plan and set your financial goals beforehand. In case you are worried about your loved ones paying the dues, then the truth is that a consolidated loan is discharged if the borrower were to pass away.
For a more thorough read, see our 2-part guide Are You Lost In Loans? Get Organized. Consolidate!
Planning Tip #1 Research Tax Deductibility
Citizens of USA are afforded a tax reduction in the adjustment according to IRS income form 1040 and 1040A. Studying and using it properly can easily avail you an interest reduction of up to $2500 in student loan interests. Certain limitations apply to this tax deductibility, and you’ll need to do some homework on the limitations to avail maximum benefits.
Forms for calculating the reductions are easily accessible from the IRS (publication 970 chapter 4), though you’ll have to spend some time getting the hang of it.
Planning Tip #2 Avoid Joint Consolidation
Though consolidating your loans jointly will allow you to share the burden of repayments, it has the capacity to add more strain in the long term.
A joint consolidation treats the spouses as two entities and not one. As a result, you cannot apply for a payment deferment in case you want to temporarily stop payments, perhaps due to unemployment, unless the condition applies to both the spouses.
This condition can be extended to death and divorce as well. In case the spouse passes away, the remaining spouse will have to repay the complete loan whereas under normal circumstances the loan is exempted. A divorce is likely to create unpleasantness incase one spouse does not, or is not able to, pay on time.
Planning Tip #3: Keep Certain Loans At Bay
Some loans do not go well with other loans. As a result, lumping them together might increase the overall interest and cost you certain benefits. A case in point are the Perkins loans and Harvard loans, whereas a Stafford loan even if taken from a private lender can be consolidated without losing the benefits.
Preparing for a consolidation requires extensive research and due diligence. Therefore, do the homework, and let a professional know when you get suck, or are ready to consolidate. They know the rules and keep abreast with the changing game.
Source
http://www.degreesource.com/best-top-5-tips-for-private-student-loan-consolidation/
http://www.oprah.com/money/Suze-Ormans-Advice-for-Consolidating-Student-Loans
http://www.finaid.org/loans/consolidation.phtml
http://banking.about.com/od/loans/ss/studloanconsol.htm
http://taxes.about.com/od/deductionscredits/qt/studentloanint.htm
http://www.irs.gov/pub/irs-pdf/p970.pdf
