Consolidating Student Loans

Consolidating Student Loans

Consolidating Student Loans

It’s not easy being a recent graduate in the current job market. Many graduates find themselves in substantial debt after their graduation and unable to find enough work to pay back that debt. Some graduates can only find low paying work in fields unrelated to their degree while others can’t find any work at all.

With college tuition fees, living expenses, as well as the cost of course materials, many students find themselves in as much as $40’000 or $50’000 debt when they finish college – and that’s for a run of the mill degree, not medicine or law. So as soon as they leave college they have the stress of this very large debt hanging over their heads.

One of the solutions to managing that level of debt is to utilise a student loan consolidation program. The tricky part is picking the right company for the consolidation and the right repayment plan.

It is crucial to understand that people wishing to consolidate their student loans have a number of choices to make. They have to choose which lender to use, which program and what payment schedule that involves.

Consolidation of debt is basically gathering up all of your debt from various loans and rolling it into one loan. There are a number of advantages to consolidating your debt, the biggest one being that you can obtain a better interest rate on the loan. The various small loans might have a wide range of interest rates, and that will be replaced by a single rate, also making managing your debt simpler.

One of the tricky problems with consolidating your debt is that it differs depending on if your debt is to the government or private sources.

If you used federal government sources for your college fees, it is usually best to seek a government consolidation program. Government loans are usually at a lower rate of interest as well, so this should be your first choice for loan consolidation.

Private consolidation is quite easy to obtain as they are simply new loans taken out to pay the old loans. However you will need to go through an approval process for both kinds of loan consolidation programs.

Federal loans are different because they are “direct” loans from the federal government while “FFEL” loans are private loans subsidized by the federal government.

To obtain a private debt consolidation loan you just need to demonstrate that you are able to pay the new loan back. That means you need a source of income and reliable employment.

The federal programs on the other hand are harder to get into because you need to prove you are in genuine need. If you can repay your normal federal loans, they will not allow consolidation.

You can really stretch out the terms of loans under debt consolidation programs as well, with some loans stretching as far as 30 years. This is great if you really need to lower the monthly payments on your debt. So before considering defaulting on your debt, make sure you think about consolidation first!

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