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Student Debt Consolidation
Thinking about consolidating your student
debt?
Student-Debt-Consolidation.com is a
resource site to help you understand if taking out a debt
consolidation loan is the right thing for you as well as helping
you
proceed with a consolidation loan. Numerous articles will be
available addressing all aspects of managing your student debt.
The first thing you must ask yourself is why you want to
consolidate your |
student debt. This is not a subject to be taken
lightly, since you only have one opportunity to consolidate federal
student loans, so you need to get it right because you will be living
with the terms of your new debt agreement for at least 10 years and for
many people it is far longer than that.
Here are a few of the major reasons for
consolidation of your federal student loans (for private loans number 3
is not applicable).
- Get a Lower Interest Rate
- Deal with Only One Payment
- Avoid Default by Changing to a Lower Repayment
Plan that Corresponds Better with Your Income.
Let’s address each of these Issues:
Get A Lower Interest Rate
This is a solid reason to consolidate your student
debt. And now (late 2009) is a great time to do this because interest
rates are at or near historical lows. If you can lower your loan
interest rate by 1% or more you can save hundreds or more, probably
thousands of dollars over the life of the loan. Student loans are
long-term loans and interest builds up for at least 10 years, sometimes
20 to 30 years. So this can make a huge difference in how much you end
up paying for your education when it is all said and done. Even small
increments like an eighth or quarter of a percent make a big difference
in the end.
Deal with Only One Payment
This too is a good reason to consolidate your
student debt. Most young people are unfortunately not good at dealing
with debt at all, much less juggling several student loan payments each
month. So having just one loan to keep track of each month would be a
good thing, but this should probably be done only when you can also lock
in a lower interest rate. Normally if you are still a student and you
are not yet paying off your loans you can have several student loans and
not lose control of anything since you don’t have payments due yet.
However, when interest rates are really low, as they are now in late
2009, it might be wise to consolidate and lock in a very low rate for
the life of the loan.
Avoid Default by Changing to a Lower Repayment Plan
that Corresponds Better with Your Income
This only applies to federal student loans.
Private loans do not have the flexible repayment schedules offered by
federally backed loans.
Let’s say you are way behind on your federal
student loan repayments, maybe even 5 or 6 months. You’re in trouble
and headed for default (which normally comes after 9 months of missing
payments)- a place you don’t want to be. It is possible to consolidate
your student debt and qualify for lower monthly payments with a
graduated payment plan or perhaps an income-contingent repayment plan.
If you are lucky enough to get an overall lower interest rate as well,
you have the best of both worlds. But if interest rates are high when
you fall into this sort of trap, you will lose any future opportunities
to refinance if interest rates drop at a later date.
So student debt consolidation can be helpful and
save you a lot of money in the long run. A very high percentage of
people carrying student loans eventually do consolidate. You need to be
aware of your options so you can get your debt paid off as soon as
possible and avoid default. So keep looking around this site and others
until you are well versed in student debt consolidation options.
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