How Loan Consolidation Works
Student loan consolidation is designed to combine multiple loans into a single, larger loan. Basically, one lender agrees to buy up your loan at a certain price. The original loan companies make a fraction of what they would have, but it is a guaranteed way to make immediate money off of the loan. Now, the new loan company owns your loan and receives the payments. The new lender wants to do this because they will earn a profit as long as you pay off your debt. …show more content…
Many students choose to consolidate because it allows them to deal with just one lender and a single monthly payment. Other students choose to consolidate because it restarts the time clock for loans that are in forbearance or deferred. Consolidation can lower the interest rate on certain loans, and it may offer new repayment options. Depending on the lender, you may be able to access extended repayment plans, income-sensitive repayment or other options.
The Drawbacks of