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8/18/2000

Consolidation May Ease Loan Burdens

Cheryl A. Thompson

Loan consolidation can provide relief from the hassle of paying down multiple student loans and worrying about variable interest rates.

Although the typical television advertisement about loan consolidation portrays the borrowers needing this service as people down on their luck, recent pharmacy-school graduates may also need help in juggling their debts. 

By rolling education loans into a new, single loan, a borrower could: 

  • Reduce the total monthly payment,  
  • Secure a fixed interest rate, and  
  • Arrange a repayment plan more suitable to current personal circumstances.

Plus, there's the convenience of writing only one check a month and dealing with only one creditor. 

Keep in mind, however, that a new loan means a new repayment period and more time paying interest on old debts. Also, a borrower who consolidates loans loses any grace period—the time between the lender disbursing the loan amount and the borrower making the first required payment—remaining on the original loans, except if the borrower consolidates the loans while still enrolled in school. 

The federal government and private lenders such as Sallie Mae offer loan consolidation plans. Try out the government's calculator to estimate the outcome of a "direct consolidation loan" from this major lender. 

Can't remember which lenders originally made the loans? Check the National Student Loan Clearinghouse's LoanLocator. More than 60 loan agencies have authorized the clearinghouse to release information to students who provide their Social Security number and birth date.