The cost of higher education has skyrocketed in the past couple of decades. Even if you get the resident rate for the University of Wisconsin-Milwaukee, you probably have to take out a student loan. Signing the Free Application for Federal Student Aid (FAFSA) is the easy part, because you do not feel the real hurt until later.

Even if you know what you will owe, making that first loan payment can be shocking. Many graduates find out that it takes away a much larger percentage of their income than they anticipated. Many also have trouble paying back their loans, but they are generally not dischargeable through bankruptcy. At this point, many people consider consolidation, but is it the right decision?

The answer to the question above is “maybe.” Like all other debt relief situations, it depends on your circumstances. You should always consult with a professional, like a bankruptcy attorney. Do not rely on this post as legal advice for your particular situation.

With that said, there are some very real benefits to consolidation, including:

  • Making a single payment: Consolidation brings multiple loans into one payment with a single due date.
  • Lower interest rates: People may be able to obtain lower interest rates through consolidation, which can save money in the end.
  • Extended repayment terms: Many lenders allow you to extend the term of your loan, which can reduce your monthly payment.
  • Help with default: Consolidation is essentially refinancing, and it can help with default in some cases.

This post discussed a few of the benefits of consolidation. Are there any risks? There are a few “cons” to consider when making a decision to consolidate. We will cover those in the second post of this two-part series.