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Should You Extend the Repayment Period When You Consolidate Student Loans?Should You Extend the Repayment Period When You Consolidate Student Loans?


One aspect of student loan consolidation that many people enjoy is the ability to extend the loan repayment period from 10 years to 30 years. By extending the repayment period, monthly payments are drastically reduced. However, extending the repayment period when you consolidate school loans means that more money will be paid in interest over the lifetime of the loan. Is it smarter to pay down your student loan faster in order to save money on interest?

Evaluate the opportunity cost of paying down student loans faster

In an ideal world, you’d have no debts. But in reality, you need to organize your debts in a way that makes the most sense for your long term plans. You’ll need to ask yourself what investing opportunities you could be missing out on by funneling the extra money into paying down your college loan.

Saving for a home

Let’s assume you could save an additional $200 a month by choosing a 30 year repayment term and used that savings instead for a down payment on a home. You would probably earn more over the years on the equity earned in the home than you would have saved by paying down your college loan early.

Paying down high interest debts

Most financial experts agree that you should concentrate on paying down high interest debts first. When you refinance college loans through a Federal Student Loan consolidation program, you enjoy very low interest rates. If you’ve got high interest credit cards or loans, it may be more cost effective to use the money saved from extending your repayment period to pay these debts down first, and then concentrate on your student loan.
Just because you extend the repayment period when you consolidate student loans doesn’t mean that you can’t pay off the balance early. When shopping around for a company to refinance your student loans, make sure to inquire about any penalties for early repayment. At ScholarPoint, we’re supportive of your financial goals and never charge any penalties for repaying your loan early.

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