Do you need some basic information about how student loan consolidation works? And do you like to make things out of green Play-Doh? From FinancialAidPodcast.com, here’s a video that uses Play-Doh to demonstrate the basics of student loan consolidation:
Overall, I’d say this is pretty useful– and a pretty smart way– to use something as simple as Play-Doh to describe an idea that can confuse students quite a bit.
However, there’s one part of the loan consolidation picture the video more or less ignores– interest payments over the long term. The thing is, if you stretch out your Play-Doh (i.e. loan payments) over a longer period of time, you pay a lot more interest. The overall pile of green Play-Doh magically oozes to a larger and larger size, even as you slice off bit by bit at that compounding green Play-Doh pond thing once a month.
In other words, if it all possible, don’t spread your student loans out over longer periods of time, even if you consolidate your loans (which you can do without extending the payback period). Remember, when it comes to your green Real-Dough, you want to keep as much as possible.