Securing a student loan is a fairly easy thing to do, but repaying it is quite another matter. Two thirds of American undergraduates leave school owing, on average, in excess of $20,000 and that doesn’t count the debt incurred by those who drop out of college before graduation. For those who go on to graduate or doctorate programs, they can amass an enormous debt load by the time they complete their educations. Reality generally sinks in as they approach graduation, and the loans are about to become due.
With high unemployment, and the job market flooded with highly qualified, experienced workers, it’s becoming increasingly difficult for new college grads to find a job, let alone one that pays well. Less than twenty percent of college students have a job lined up when they graduate and yet within six months they will need to start making payments on their student loans. To complicate matters most students have multiple loans; some federal, some private, and each with different terms, interest rates and fees.
Consolidating your loans may be a practical solution for managing your student debt. However, if you have taken out both federal and private loans they need to be dealt with separately. Federal student loans from approved lenders can be consolidated, but you cannot roll private loans into that agreement. And you should never consider including federal loan debt in a private loan consolidation, as you will lose the protections and benefits inherent in federal loans.
If you have decided to consolidate your federal loans, you should begin the process as soon as possible after graduation. Start by figuring out exactly how much you owe. Your school’s financial aid office can usually help you or you can check the National Student Loan Data System on-line. You can apply for a consolidation loan on the federal government’s website or through a private lender. The terms and interest rates for federal consolidation loans are mandated by the government and currently you have a choice of four different repayment plans. You really need to take some time considering the pros and cons of each one before you determine which plan is best for you and fits your current budget. Once you sign the consolidation loan agreement it is essential that you keep up your monthly payments and make them on time. Should your circumstances change for the better, you can pay off your federal consolidation loan at any time without penalty.
If you also have a number of private loans, you may consider consolidating them separately, although a private consolidation loan is much more difficult to obtain. Lenders will usually base the terms and the interest rate of your loan on your credit score and loans for people with bad credit can be hard to get. Additionally they are likely to charge service fees and prepayment penalties. When you are in the market for a private consolidation loan it’s important to shop around for the best rates from reputable lenders. Many lenders are willing to modify the loan agreement, such as removing the co-signer, once you have proven yourself by making regular payments for at least two years.
Like any important financial commitment, you should carefully consider all of your options before you take out a consolidation loan. Make sure you understand the terms and get some advice before signing anything. With a consolidation loan, you are entering into a legal contract that you will have to live with for up to thirty years.
Debt Relief