Due to the ever-increasing educational costs and college debt in the nation, a student probably thinks more about student loans and ways to pay them off than the studies. The scenario is unchangeable from last 20 years.
According to a recent survey conducted by the Student Loan Report, in 1996, an average student completes graduation with $12,850 student loan. Now, in 2016, a student is completing graduation with more than $35,000 debt load. The survey reveals that the impact is also alarming.
On July 2 - July 19, 2016, an online survey has been conducted among 1,220 college graduates who are carrying debts. The results revealed that the debt load is restricting the students from achieving their dreams such as buying a home, getting married, and finding a desirable job.
You can get mainly two types of student loans that can be consolidated: 1) private student loan 2) federal student loans.
You can consolidate the private student loans with other private loans. But, you can’t consolidate your federal student loans with a private loan.
Federal student loan consolidation is a refinancing program, which will help you to combine all your existing federal student loans into a single one.
This kind of debt consolidation will help you in managing your finances better, provide relief from debt, and also ensure long-term benefits.
Federal student loan consolidation includes different types of loans such as:
You can consolidate your federal student loan after the completion of your graduation or when you leave school. But, you need to qualify to consolidate your federal student loan. The qualifying criteria are:
Federal student loan consolidation has some significant benefits that can reduce a borrower's burden.
It simplifies the borrower’s finances by combining multiple federal student loans into one single loan. You can make your payment process easier by making a single monthly payment towards your student loan.
With the help of federal student loan consolidation, a borrower can get more flexible monthly payment option. Repayment can be made over a longer span of time. A borrower can also make an extra payment or larger payment, and also can change repayment plan once in a year.
A federal consolidation loan lowers your total monthly loan payment in two ways: either a lower interest rate or a longer time for repayment, depending on the interest rates and terms of the current loan.
In case you are having difficulty in paying back your federal student loan, you can contact your loan server and let him know. In such cases, you may qualify for forbearance, deferment or other repayment alternatives that might be more affordable for you.
With the help of student debt consolidation, you can extend the repayment term of your loan beyond the 10-year period, which is standard. Even though this will increase the total amount you pay in interest charges, it will reduce your monthly payments.
You can reduce the monthly student loan payment by as much as 50%.
If you get a good job just after completing your graduation and make good financial decisions such as making payments on time, keeping credit card balances low, then your credit score can increase. Once your credit score increases, you can get a lower interest rate on your new consolidation loan.
Q1. From whom do I get the answers to my consolidation related queries?
A1. You need to contact Loan Consolidation Information Call Center at 1-800-557-739 for further assistance.
Q2. Can I consolidate both of my private and federal student loans together?
A2. No. This is because Federal student loans can only be consolidated through Govt. approved student debt relief programs like IBR (Income-Based Repayment Plan), ICR (Income Contingent Repayment plan) etc.
Q3. Can I consolidate Parent Plus Loan?
A3. No. It can’t be consolidated by the federal loan consolidation program.
Q4. When is consolidation not a worthy option?
A4. If you have almost paid off your student loans, just a few more dollar left or few years left to close the matter, then consolidation is not recommended since you may lose any benefits that you’ve earned at the time of switching to a new lending institution.
Try to limit your expenses if you are planning to consolidate your student loan debts. Eliminate excessive usage of credit cards as well. Also, you should search for different repayment plans that are available to meet your different purpose.