You’ve done it! You have finished college and now the excitement of finding work starts. But with it should also comes a worry about repaying your student loans. But don’t stress out too much, there is still a little bit of time, before you start getting your loan repayment bills, this time is called grace period. Find out what grace period is and how you can use it to greatly reduce your debt with student loan consolidation.
What is a grace period?
Grace period is the time between your graduation and the time when you start receiving bills for your student loan. The idea is to give you a little bit of time to find work, so you can easily make your monthly payments. Usually grace period is 6 month, but it can be different for every loan. You will have to check your loan papers to confirm how long your grace period is.
If you have not consolidated your college loans already, grace period is the perfect time to do so. If you go for a student loan consolidation program during your grace period, with most lenders you can lock a lower rate for your new consolidated loan. If you want to consolidate after the grace period, your rates will be higher.
Why go for a student loan consolidation?
There are many benefits of consolidating your loans. First, the interest rate on your new consolidated loan will be lower than the rate on your existing loans. This means lower monthly payments and shorter time to repay your loan. Second, you will get one bill instead of several, so it is more convenient. Third, most lenders offer special discounts and benefits when you consolidate. Usually you get rewarded for paying before the due date, for example your rate can be reduced by 1 percent after making 24 payments on time. This can be a big saving, especially if you have a big debt.
Are there any disadvantages of loan consolidation?
There is one possible disadvantage – when you consolidate your interest rate is locked, it won’t get any higher or lower while you repay. On the other hand, the rate on your unconsolidated loans might increase or decrease over time. So in theory it is possible that in the future your loan rate will go down and become lower than your consolidated rate. However, in practice, bearing in mind current economic situation it is very unlikely. So I would say, there is absolutely no reason, why you shouldn’t consolidate your debt.
How consolidation during grace period works?
If you took a federal student loan, consolidating it during your grace period would give the same results as consolidating while you are still a student. In a sense grace period is a time when your student status is deferred or postponed by six months. After that, you will be in repayment period. In-repayment rates for consolidation are always higher.
If you have several loans by private lenders, the situation is a bit different. They might not give you any grace period at all. So it is important to review the terms of your loan before you graduate.
Consolidated loans don’t have grace periods
One thing you have to know is that consolidation loans don’t have any grace period. That means that generally you will get your first bill in 60 days after you have been approved for consolidation. So if you think that you might need some time to find work, it is better to wait with consolidation before your student loan come close to the end of their grace period.
Don’t miss the opportunity to consolidate your loans while you are still in grace period. You can save a lot by locking a lower rate.