Debt of the Nation

How much do Americans owe, generally? About 76 million individuals who comprise the so-called Baby Boomer owe more than 40% more than the value of their liquid and illiquid assets and properties. What does this mean? This simply means that many are paying for debts for more than three decades now.

Effective Management of Debt

Is this picture encouraging? No. If we are to take the "rule of inheritance" of generations, then the younger generations of American will be put in the same situation decades from now: capable of acquiring assets but lack the financial know-how to settle debts immediately. This is where student loans consolidation enters the scene.

Student loans are but one of many kinds of debt plaguing Americans around the country. Credit is often misused, and paychecks are stretched to the limit. Investment cannot be part of the picture if a person is buried in debt.

The Importance of Getting Sound Financial Advice

The repayment of debt has never task for anyone. According to the Federal Reserve:

"Americans owed $1.33 trillion, excluding mortgage debt, at the beginning of 1999. With the average American now spending more than 10% of his or her discretionary income on monthly interest payments, excluding mortgages and car leases, CPAs can provide clients with a valuable service by helping them better manage their resources."

The debt of course, has already increased since this computation of the Federal Reserve. But the good news here is that traditional approaches in financial planning still work.

Optimal Payments for Student Loans Consolidation and Other Loans

If you have monthly payments due for student loans consolidation, you of course have to put a limit on how much you would be setting aside for debt repayment. It's not healthy to focus all your energy into repaying debt, and ignoring all the other necessities of life.

The optimum amount of money for debt payment is about 36% (this is the maximum amount) of your gross income. If you have a mortgage, limit the payments to about 28% (because the debt is larger). Other installment payments should be limited to about 20%. For student loans consolidation, you can set aside from between 10% of your gross income to a maximum of 15% or 20%.

To maximize the benefits of a financial consolidation, make sure that you avoid marketing ploys that will bury you deeper in debt. According to Roger Pauline, a financial aid consultant for Sallie Mae:

"Payments should not be delayed needlessly. Windfalls should be used to repay debt. If you can, set aside bonuses for the complete repayment of debt. You will feel things easing up once the debts are all over and your contract with the financial consolidator is over."

There's no doubt that interest rates of student loans would be reduced once you get your consolidation. Use the opportunity to reduce interest rates to lower the actual sum of your debts. Even if you're still in college, start paying off your loans by paying off the interest rates. That will save you a lot of money in the future, and you will be thankful that you were financially savvy at such a young age.