Ease Your Financial Burden, Consolidate Student Loans
Consolidation of student loans
For recent college graduates or those nearing graduation, student loans can be a heavy financial burden. It will soon be time to begin repayment. A question many people have is whether they should consolidate the loans or not.
All student loans fall into one of two categories, federal loan or private loans. Loans issued by the federal government include PLUS, Perkins and Stafford. Loans issued by a bank or other financial institution are of course private. Since federal loans and private loans have different rules for interest rates, it's often best not to consolidate them if you can avoid it. Federal loans also offer more protection to the borrower in the form of deferment and cancellation that will likely be lost if you consolidate them with private loans.
Consolidation usually works by setting the new interest rate equal to the average of all included loans, with an additional 1/8% tacked on for good measure. When consolidating, the loan company will often offer incentives in the form of lower interest for such things as automatic withdrawals and paying the loan on time for several consecutive months.
As of the beginning of 2009, students can base their repayment of student loans based off their income. Loan companies can only charge you up to a certain percent of your current income. The rate is calculated based on the difference in your income and 150% of the poverty level. Any debt you have not paid off in 25 years will be cancelled.
Once you have decided that consolidation is the right choice for you, the next step is to shop around. Search for discounts, the lowest rates, fewest penalties, etc. There are many institutions and companies that offer loan consolidation and they all compete with one another. Use this to your advantage. Be especially wary of companies that charge a penalty for early repayment of a loan.
Several online sites can assist you in finding the best option and rates for loan consolidation. Studentloanconsolidator.com, loanconsolidator.ed.gov, chasestudentloans.com and studentloan.com are all excellent resources you should take advantage of before making your final decision. Repaying a loan can be a long road so make sure you are happy with the lender before signing the papers.
Many individual states also offer loan consolidation programs. Explore these options if they are available and weigh them against what the private lenders are offering you. Often the state will give you the best rate, but not always. Do your homework and plan ahead.
The biggest benefit of student loan consolidation is the ability to make one lower payment each month. Remember that in the long run you will end up paying more in the form of interest. The convenience factor may also make consolidation more attractive to some. this is especially true if you have loans with similar interest rates from numerous sources. There is no one right answer and only you and your financial advisor can decide your best option. Congratulations of graduating college. Welcome to the real world.
Questions and Answers
Paying for college can often times make anyone's head want to spin. Many things that have to be paid for like books, supplies, clothes, and classes. All these things can be a bit expensive and can often leave people wondering about saving money with student loans. Many options are available when it comes to paying for college.
There are three options, including deferment as listed: With a FULL REPORT, there is no payment of principal or interest due while enrolled in school (up to four consecutive years). Payment of principal and interest begin six months after graduation or if no longer enrolled at least half time.
Considering all the benefits of the federal, direct, government and college student loans, one might wonder why anyone would need or want to investigate the alternative student loans.
Every year, student loan interest rates are reconfigured on July 1st. In recent years, this date has come and gone with no cause for alarm, but this year is different. The impact on students is a drastic interest rate hike on all federal student loans including the Stafford loan, the PLUS loan, the Consolidation loan, and the Perkins loan.
The average teaching student graduates with over $18,000.00 in student loan debt. After interest is added you could be paying a total of almost $40,000.00, so it is extremely important to make sure you are getting the best deal possible with your loan consolidation.
If you graduated in the spring, or will be graduating this spring, now is the time to look into consolidating your student loans. Although your school gave you some information when you took out your loans, they may not give you the full scoop on consolidating after you graduate. If you’ve been wondering, “How do I consolidate my student loans?” keep reading to find the answer.
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