The Best Time to Consolidate Student Loans

Many students take out subsidized and unsubsidized Stafford loans every year of college – a total of 8 different loans, all accruing interest at a variable rate, and all showing as open and unpaid lines of credit on credit reports. Many students also take additional loans throughout their college years such as Perkins loans and various industry specific loans, further increasing the benefits of a single low interest loan payment.

By consolidating your loans, you'll take out one fixed rate loan to pay off all of the other unpredictable variable interest rate loans. The repayment period of a consolidated loan is longer, meaning much lower monthly payments. For those just out of college and starting careers, lower student loan payments offer a safe way to improve cash flow and reduce dependence on credit cards.

Unlike regular student loans, there are no deadlines for consolidating, although consolidating during certain times of the year can result in more savings. For those planning ahead, the absolute best time to consolidate is during the six month post graduation grace period. Refinancing student loans during this grace period means locking in to 0.6% lower interest rates than are available after the grace period has ended.

The loan consolidation process can take several months so it's critical to start the application processes soon after graduation. Don't worry about sacrificing your grace period by applying early. For federal loan consolidations you can enter your grace period end date so that the loan won’t begin until that date.

The most important time to refinance in general is when you need to increase cash flow and reduce or reorganize your monthly bills. Making high student loan payments and having just enough left over to only pay the minimum balance on high interest credit cards just doesn't make financial sense. Through consolidating, the average $350 monthly loan payment can be reduced to around $165, freeing up an extra $185 per month to pay down high interest debts.

If possible, save the money and free yourself from debt altogether. $185 per month saved over the course of 5 years adds up to $11,000 to purchase a vehicle outright, start a business, or use for a down payment on a home. Although the loan amount is longer, leveraging your payments so that you pay less when your career is young can give you the cash flow needed to get your life off to the right start. Any time is a good time for refinancing student loans. Low fixed interest rates and longer repayment terms are a winning combination for anyone looking for a smarter way to manage their monthly budget.

ScholarPoint Financial, Inc. is a national online consumer lending company specializing in student loans. We believe in combining state-of-the-art technology with world class service to help students and parents easily gain access to data, become informed, and enjoy the process of obtaining a college loan.