Student loans are like a double edge sword - without the loans you wouldn't be able to get your college education and degree - but with the loans, you're often saddled with a huge mountain of debt right as you are starting out with a new career. That doesn't leave much money left over from the new job you got your degree for!
If you're in a position where student loans are putting a strain on your budget or actually making your finances go into the red and giving your credit score a turn for the worse, then you may want to look into consolidating your student loans into a single loan that has a lower interest rate, longer life, and lower monthly payment.
A direct student loan consolidation might be for you if you're struggling to meet your monthly obligations and have used your deferment options already. Especially if you are about to default on your loan, you really should check into consolidating to save your credit rating. A direct student loan pays off all your old individual loans and leaves you with a new loan to start all over again. It's like wiping the slate clean and getting a fresh new start.
The deferment options become available to you again with the new loan in case you ever need it again and you'll usually qualify for a much lower interest rate since the consolidated loan will be for a larger amount. Also, when you consolidate, the old loans show up as paid on your credit report, so that will help to improve your credit standing as long as you pay your new loan on time each month, which should be easier to do with a lower payment amount.
There are actually four plans to look into when it comes to repaying your student loan consolidation -
- Standard repayment plan: This gives you a set monthly payment amount for a period of up to ten years.
- Extended repayment plan: This plan also has a fixed payment amount each month but the life of the loan can be extended to between 12 to 30 years, depending on how much you borrow. This makes the payments automatically lowered since they are spread over such a longer period of time, however when you do this the actual total amount you repay in the end will be larger due to more years of interest.
- Graduated repayment plan: This option will also allow you to stretch your payments over a longer period of 12 to 30 years. The difference is that your payments will increase every two years. This could be beneficial to you if you are just starting out in your career and not making as much money now as you will be in the future. Just make sure your job performance qualifies you for all those big raises you're expecting!
- Income contingent repayment plan: The payment plan is designed for those with a job and family because it takes a look at your annual income and total student loan debt, along with the size of your family, and then comes up with a payment amount that's spread out over a 25 year period.
If you're still a student in school when you consolidate, it's possible that you'll qualify for a six month grace period before you have to start making payments. A consolidation loan will benefit those who are looking at many years of payments ahead. If your student loans are almost paid off and you're having financial difficulties, you may want to look into forbearance and deferment first, because if you refinance, your loans will be spread out over more years and that will increase the total amount you will have to repay.
The rising cost of a university education has led to a boom in student lending throughout Europe and North America. European students used to low costs for higher education are facing fees, tuition and other costs that make student loans a necessity. Your experience with student lending is simpler with direct student loans from accredited lenders rather than bank loans designed for non-educational ventures.
It is important for graduates to understand the terminology involved with student loans before leaving school. A direct student loan implies a payment of loan funds from the lender to the student and his family without passing through a middle man. Most direct student loans have a feature where the money needed to fulfil tuition and fees are distributed to the university first before the surplus is sent to the student. Direct student loans provide financial flexibility that allows a university student to live comfortably while going to school.
Students also need to realize the nuances of subsidized and unsubsidized loans for proper financial management. Subsidized student loans feature interest rates paid by the government on behalf of the student through graduation. Unsubsidized loans require repayment of interest accrued during school as part of a monthly repayment plan. Smart students stick with subsidized student loans to avoid the overwhelming cost of interest rates following graduation.
Direct student loan providers offer flexibility when it comes to repayment schedules. Most providers give the loan recipient several options including a front-loaded schedule and a balloon payment schedule to meet different financial needs. It is vital for university students to review every repayment option for their direct student loans. There is no rule of thumb stating that any one repayment schedule is best but the temptation to back load loan costs will mean a higher proportion of loan repayment toward interest rates.
A final consideration in using direct student loans is the consolidation of multiple loans after graduation. Loan consolidation involves the combination of two or more loans into a single repayment plan that is designed as a lifeline for financially strapped students. The lure of consolidation needs to be looked at through a reasoned lens. Graduates need to look at the lender offering consolidation to find a track record of responsibility to clients as well as a wide range of consolidation options. Students need to use the student loans process as a lesson in responsible financial management.
Both Carson Danfield & Mike Sandiford are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Carson Danfield has sinced written about articles on various topics from Domains, Adwords and Aging. Carson Danfield is an "Under the Radar" Internet Entrepreneur who's been quietly selling various products for the last 8 years. Although you've probably never heard of him. there's a good chance you've visited his websites in the past and even purchased s. Carson Danfield's top article generates over 110000 views. to your Favourites.
Mike Sandiford has sinced written about articles on various topics from College Student Loan, Parenting and College Student Loan. Mike Sandiford is the Sales Manager at JustClick, who are a leading source of and , also offering. Mike Sandiford's top article generates over 3600 views. to your Favourites.