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December 19, 2007

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Spot on... As a loan officer who deals with this on a daily basis, I am amazed to see the number of individuals who consolidate to create some breathing room--only to spend this "savings" into obilivion. If irresponsible spending habits are the root of the problem, consolidation alone will do very little to fix them.

Of course, with student loans, you have to be careful...once you consolidate your loans, you can't "reconsolidate" with a lower rate unless you have more loans to include.
Almost immediately after graduation, I consolidated my government loans with the company that I have my private student loans with. I'm not sure if it was the best thing to do, except that it helped me keep track of those loans more easily. Part of me also wishes I had shopped around a little bit to see if I could have gotten a lower interest rate.

The focus should always be on eliminating debt. As noted, consolidation often leads to expanding debt.

Best Wishes,
D4L

Are you sure you weren't talking about me? I was feeling a little deja vu. That certainly was me. Several years ago my husband and I consolidated our credit card debt and paid it off through a 401K loan. Then he lost his job. That loan became income and we had a HUGE tax bill the following year. The IRS was nice about a loan to repay it. But as soon as we sold a piece of property we had, we paid that loan off. As you can see, we were in an awfully vicious cycle.

Happy holidays and thanks for reminding me why I am now on a cash basis for purchases!

Yep, been there and done that! My wife and I consolidated our debt (credit card of course!) and two years later we're back in the same spot. The first time we got scared but we didn't learn that we had to change OUR habits. No one was going to wave a magic wand and solve our problems. We are the only ones that can solve our problems. Now we are on track to paying off our debt, both the consolidation loan and all the new credit card debt!

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