Debt Advice Article
Is Student Loan Consolidation Right For You?
Congratulations on making it through college. You are off to a great start towards a better future for you and your family. If you are like most people, you graduated from college with a degree and a mountain of debt from all your student loans. It is great that student loans exist, otherwise many people would not be able to afford to go to college at all. It is also great news that a student loan consolidation program exists to help you manage all those loans and work through your debt in a manageable and affordable way.
What is a student loan consolidation program?
A student loan consolidation program helps new graduates meet their financial obligations by lumping all the loan payments together into one easier to pay loan. This can reduce the monthly payment by up to 50%. The exact amount of the reduction will depend upon the type of student loan consolidation program selected and the total amount of the loan. It is also possible that by consolidating your loans, you will qualify for a lower interest rate thereby lowering your monthly payment even more.
Consolidating your student loans will probably improve your credit report since you it will help you to meet your monthly obligations much easier, and your individual loans will reflect a paid in full status.
Do defaulted student loans qualify for consolidation?
There are specific student loan consolidation programs just for defaulted student loans. In order to accept this type of loan, you must also enter credit counseling, which will teach you how to manage your money better and help you rebuild your good credit. The loan provider will pay off your defaulted loans so all you will need to do is make a single payment each month to the new provider. This is an excellent and wise choice if your loans are in default. Your payment will be lower and you will not have to worry about having your paycheck garnisheed and getting embarrassing telephone calls about your late payments. Plus you will start rebuilding your payment and be on the road to an improved credit score.
Federal Student Loan Consolidations
If your student loans were issued by the government instead of a private bank, then you should be eligible to get a federal backed student loan consolidation. This is good news because federal loans usually have lower interest rates and the loans are very easy to qualify and apply for.
When you consolidate your student loans, you lump them all together into a single loan and extend the life of the loan. This lowers the monthly payment. In addition, the larger loan amount will usually qualify you for lower interest so you save even more. It will probably take you longer to pay back your loans, but it will be worth it to have lower monthly payments while you are getting established in your new profession and earning less salary. A student loan consolidation can really help your budget and leave more money in your bank each month for other expenses.
