Find it hard to find unbiased information on student loan consolidation? Let me help with that. When I graduated from college, I had somewhere around $12,000 in student loan debt. Seeing how I would have multiple payments to different lenders, and fearing increasing rates over time (yes, your rate can vary depending on the loan type and the lender), I decided to investigate a potential consolidate student loan. But before I tell you what decision I made, let me give you a few benefits and problems with student loan consolidation:
Benefits
1. The ability to make a single payment with a single lender, thus reducing the headache of paying multiple lenders. 2. Most lenders offer a fixed rate of interest over the life of the loan. 3. Typically, consolidate student loan companies will offer a lower interest rate than many of your current student loans. 4. Lenders will usually offer a longer repayment period, thus allowing for a lower monthly payment. 5. Student loan interest is tax deductible, thus making a longer repayment period more attractive for tax purposes. 6. Some lenders will even offer an interest rate discount for good payers - more on this in a minute. 7. If you are struggling to find a job, many consolidation lenders will allow a deferment of forbearance, allowing you more time to acquire stable income, and may grant a lower interest rate for doing so, due to the lender accruing interest during the deferment/forbearance period.
Problems
1. Longer repayment periods. Yes, I know I mentioned it as a benefit above, but it can also be a problem. While longer repayment periods tend to reduce monthly payments, the overall interest paid over the life of the loan is more, sometimes much more. 2. Unwillingness to negotiate. During my repayment period, I called to ask if an agreement for a principal deduction could be reached or if there was help from other organizations to pay off the student loan, and absolutely no help was provided by the lender. I guess the felt I already got a good deal with an interest rate of 3.5% 3. Default - Do not, I repeat, do not default on your student loan. Bankruptcy, and any other legal attempts to welsh on student loan debt won't work - student loans are like cock roaches, they just will not die. Be sure to pay your student loan back.
Alright, now that we understand a few of the benefits and problems, I am going to tell you what I did. I decided to do a consolidate student loan. I felt there were just too many benefits involved. The company I went with was Nelnet, and they offered a 15 year loan repayment period with 3.5% interest and a 1% interest rate discount if I made the first 36 payments on time. What a great deal! As with all things, be sure to research several different offers before selecting a consolidate student loan company.
It can significantly reduce the overall monthly payment amount, while locking in a lower interest rate. However, before you hurry out to consolidate, there are a few things to consider and to keep in mind.
When you took out your loans for educational purposes, it was a lengthy process filled with paperwork. At the time you probably paid little attention to the details of the agreements, such as how long you had as a grace period before repayment was to begin, what type of interest rate you would be charged and even how much the total amount of loans would be as you continued through school. Many students do not pay attention to how much money they are taking out each semester, only to be shell shocked when the first notification for payment arrives after graduation.
Just as with college student credit card debt, the educational loan you took out has to be repaid. But the total payment can often be too high for recent college graduates who have just entered the workforce. A loan consolidation is the best option for having a lender combine each loan with a common interest rate.
Then, you pay that fee which is usually lower than the combined payments from before. There are some pitfalls though and you must be aware of them before signing your name.
Student loan consolidation only works for loans from the Federal government. It does not apply to student credit card debt that was wracked up on a Mastercard or Visa student credit card while attending school. It does not matter if the credit cards were used for tuition, books or fees.
Only someone who received a Federal student loan can apply. You can also consolidate loans that your parent's took out on your behalf through the Federal government, but private bank loans are not valid.
A student loan consolidation is a great way to lower your payments and get the entire balance under control with one interest rate. The key is knowing what is expected of you. If the lender is asking for a monthly payment that could be hard to meet, shop around before agreeing. You do not want to default on payments.
In case of an emergency, you may not be able to defer your payments which could lead to legal action being taken against you. Do your research and you will come out ahead, while protecting your financial future.
Both Jeffry Evans & Mike Selvon 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.
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