Student Loan Consolidation Tips
College loans are easy to take out, but often much harder to pay back. The application process may be relatively simple, but most of young students entering college have little concept of how difficult paying off large debts can be.
When the time comes to graduate, that outstanding student loan debt begins to loom a bit larger for soon-to-be graduates, but most assume that repaying the money won’t pose a problem once they’ve secured steady employment with a salary that’s commensurate with their education.
The problem? That doesn’t always happen. The job market is still recovering from the economic crisis, and solid entry-level positions with strong career prospects are often in short supply.
The result is that many recent grads struggle to make ends meet while staying current on their student loan payments. Many take jobs for which they are overqualified and underpaid, because they are unable to find positions that match their educational credentials.
Having Trouble Making Your Student Loan Payments? Consolidate
For those having a difficult time making good on their student loan agreements while maintaining a decent standard of living, student loan consolidation may be the answer. Here are 10 tips for consolidating student loans successfully.
1. Most student loan consolidation programs allow the borrower to lower their monthly payments, but be aware that stretching out student loans over a longer period of time will cause more interest to accrue. Student loan consolidation can make it easier to tame your monthly expenses, but if you can make changes to your budget that will allow you to cover your payments, you may save money in the long run by staying the course with your existing loans.
2. Do your best to refinance your student loans when interest rates are low. If you consolidate your loans when the fed’s rates are high, you may be unable to take advantage of lower interest rates when they come out.
3. Student loan consolidation will allow you to make a single payment to one creditor, instead of making multiple installments to several different ones. If you’re the type who forgets to make your monthly student loan payments, this can simplify your life considerably.
4. Some older student loan programs have variable interest rates, which can cause your monthly payments to fluctuate. Consolidated payment plans offer fixed interest rates, which can make your monthly payments more predictable, and save you money over the long haul.
5. Be aware that federal student debt and private debt cannot be consolidated into the same loan. If you currently have both types of debt, you’ll need to pursue separate options for each.
6. Federal student loans can be consolidated through the Department of Education’s Direct Consolidation Loan program. The terms for this type of consolidation are fairly borrower-friendly, and monthly payments may be capped based on income.
7. Shop around for the best deal on private student loan consolidation. Interest rates on private loan consolidation programs can vary greatly, and some lenders offer more flexible terms than others.
8. Do your research before committing to a consolidation. While all lenders advertise attractive terms, only the Department of Education can perform a government loan consolidation, so there are no lenders or costs involved. The only fees potentially involved with a non-DOE party would be associated with a firm providing assistance with the process of consolidation.
9. Make sure the consolidation company you’re considering dealing with is a reputable one. Read online reviews, check their status with the BBB, and inquire with friends and colleagues who have used their services before.
10. Once you’ve settled on a consolidation program, do everything in your power to honor the terms of your new agreement. Making late payments or defaulting on your debt can do serious damage to your credit rating.
[Photo Credit: Flickr Creative Commons]
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