Consolidate student loans, should you do this? Most graduates do this in order to lock in with a much lower interest rate. This will be more convenient as there will be a single monthly payment and because of the lower interest rate, there's more cash left over, but do some research first.

First of all, let's see if you should really consolidate student loans. Remember that not all college loans are created equal and not all may suit the consolidation route. Let us consider the different consolidation options and what you have now. This will allow us to see which one may be the best route to go.

To consolidate student loans will Plus (Parent Loan for Undergraduate Students) Loan, consider this. This is a federal loan with interest rate as variable so every July 1 when the government sets the new rate, the monthly payment could change.

How about the ScholarPoint Financial Inc. loan? This specializes in student loan where with technology, the parents and students get help and learn more about loan consolidation at scholarpoint.

You can also consider the Perkins Loan which offers a loan at fixed rate. It has unique benefits that you may lose if you consolidate the student loans. For instance, it has a forgiveness program that will waive the loan if you land jobs that provide service to the community like teachers in underprivileged areas, medical technicians and nurses. If you do not qualify for these, you can still go on their consolidation loans but you may pay a small percentage extra in interest as it is based on the weighted average of the other loans.

Direct loans should also be considered to consolidate student loans. This comes directly from the federal government not through private lenders although the borrowers have to consolidate first through the Direct Loan Program. You can then have the chance to shop around for the lowest interest rate although they are getting more strict with this.

The Stafford loans is a good choice because their interest rate is variable like the PLUS loan. This can lower the repayment amount by as much as 63%, that is, with the right lender. It has also a forgiveness program so check around before signing up.

How about the Health Professions Student Loan (HPSL)? This has fixed rate and has some deferment options that you may lose when you consolidate. It has a three-year deferment period to give relief to medical residents so make sure to ask prospective lenders about deferment options.

So now that you know what you may have now and you may lose and still have to pay this for a longer period of time, go ahead so as long as you can live with this. In my case, I will choose shorter repayment plan even it means there will be no cash flow. It will not feel much different because the amount will be the same as before so you won't miss it and at the same time you will only have a single monthly payment. Here are more tips:

Find the best interest rate available. Separate the federal education loans from all private loans as they cannot be consolidated jointly. Consolidate the loans during the grace period of six months after graduation as this is the best time to do so. Why? You will get an extra .6 interest discount if the consolidation is done during this grace period.

Before you consolidate the student loans, select the preferred payment plan. Have a discussion with at least three lenders as to your payment options before you sign up. There are different options each of which we will discuss in the following tips.

For Federal loans, you have the choice between the
graduated repayment plan where at the start you pay smaller amount which will go up as your salary does and the income sensitive payment plan where a certain percentage of your salary will go to paying off your college loan debt.

The standard repayment of equal payments over a period of time short enough that will lower the interest rate.

The extended payment plan will give you the longest term to pay the loan but you will end up paying the most interest.

Why not go back to school first? If you want to get a master's degree, consider it now for then your payments are not due as long as you're in school 50% or more. If you consolidate before, the monthly payments are due and cannot be changed.

Check your budget to make sure you will have enough to live on to enjoy life and move forward in your chosen career. Count the cost of the benefits and compare with what you have now because once you consolidate, there is no turning back. Check also all the costs, hidden or otherwise. Check if there is a pre-payment penalty clause.

Another tip is to consolidate early to avoid having problems with credit rating. Your credit will not suffer if you consolidate early in addition to obtaining a lower interest rate. If you don't consolidate before the grace period ends, it may reflect badly on your credit after which you will not be able to consolidate student loans.

Brief Biography: Dr. Guzman worked for the Atlantic Health Corporation and was consultant to St. Joseph's Hospital, Sussex Mental Health Clinic, and St. Stephen Mental Health Clinic for many years. He was Director of Forensic Psychiatry at Centracare for ten years and published numerous articles, including financial ones in the Journal of the American College of Forensic Psychiatry and other medical magazines.

Copyright © July 9, 2009 Roger Guzman, M.D. (Consolidate Student Loans, But Do Some Research First) All Rights Reserved. You may copy and publish this article as long as the text, the author's name, the active links and this notice remain the same.