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If you've graduated from college, you've probably gotten plenty of offers to "consolidate" your student loans. Many offers come with a threatening sense of urgency. So you're probably wondering whether consolidating is a wise idea. And if it is, how can you discern trustworthy lenders from those just trying to make a profit off of you?

Like any important financial decision, student loan consolidation requires research. To make a smart decision, analyze your financial situation, know exactly how much student loan debt you have incurred, and compare lenders.

Consolidation works best for people who struggle to make their monthly payments and are at risk of defaulting on their loans. This is because defaulting on student loans leads to wage garnishment, income tax refund offsets, poor credit ratings, and could result in loss of your borrower benefits, such as reduced interest rates.

You don't need to be in financial trouble to consolidate, though. Many borrowers consolidate just so they can have more "spending money" each month.

Consolidation also works well for people with student loans from multiple lenders.



Consolidation will help package all those loans into one neat bill, avoiding clutter and making everything easier to manage.

When is the best time to consolidate student loans ? Most experts advise starting the process as soon as you graduate or drop below half-time status. The reason is that interest rates may be 0.6% lower while you're in the six-month grace period. This might not sound like a lot, but every little bit helps! However, keep in mind that if you choose to consolidate before the grace period is complete, you will forego the remainder of your grace period and begin repayment of the loans early (important tip: you can keep your grace period by selecting that option on your consolidation loan application).

If you're considering consolidation, shop carefully among lenders.

First, compare the "borrower benefits" you're being offered. These may include additional automatic debit discounts and additional discounts for making a certain number of on-time payments. Then compare what you will have paid in total at the end of the loan period. Loan calculators on student lender websites will help you with the math.

Second, compare your existing borrower benefits against the borrower benefits available if you consolidate. If you already have benefits that are better than what the consolidating lender is offering, consolidating your loans may not be a good financial decision.

Keep in mind that consolidation extends the time you have to repay your student loan. On one hand, unless you pay your loan off early (there is no penalty for early repayment), you'll end up paying more interest. On the other hand, you'll have more spending money each month and are more likely to keep your credit record clean. As with most decisions, there are trade-offs to consolidation.

Here's one of the best-kept secrets in the student loan business. There are NONPROFIT groups that offer consolidation loans! For example, the nonprofit lender ALL Student Loan (www.allstudentloan.org) offers very attractive rates and discounts to California borrowers. To find out whether a nonprofit lender operates in your state, visit the Education Finance Council (www.efc.org/cs/benefits).

Whichever way you decide to go regarding consolidation, remember that making monthly payments on time is crucial. Defaulting on payments can result in loss of borrower benefits and bad credit, which could affect other financial goals such as buying a car or house.

Also, try to pay off all of your debt, including student loans, as quickly as you can. Mounting debt can be a cause of stress - the last thing you need when you're starting out in a brand new career.

Consolidation may or may not be right for you. You can be confident of making a wise choice if you take a good hard look at your finances, and then research lenders, their rates, and their benefits.