A large amount of students in the United Sates today graduate with huge amounts of debt for their educational loans. The cost of a college education has steadily risen and graduates owe more now than they ever have. There are a few cases where your student loan debt might be forgiven, either partially or in full. If this isn’t an option in your case then you might take student loan consolidation into consideration.
Is Forgiveness an Option?
There are a few notable cases when you can avoid having to pay back student loans; sometimes you have to use your degree in a specified manner for a certain amount of time. However, if you think you might be eligible for something like this, you should check with the Department of Education. It’s certainly worth a little bit of your time to save yourself thousands of dollars in debt repayment.
Rules for Student Loan Consolidation Differs On Types of Loans
There are two different kinds of student loans that you might hold and the rules for student loan consolidation are different for each one. You will either have a loan that comes from the federal government or one that is backed by a private institution like a credit union or a bank.
There is also a chance that you have both types of loans and if so you will have to look at separate consolidations for them.
Should You Consider Student Loan Consolidation?
It can be difficult to keep track of all of your payments every month, especially when life gets busy. If you consolidate your student loans then you will have the opportunity to make fewer individual payments each month. In addition, you will generally be able to get a fixed interest rate which can be great for you in the long run. Applying for student loan consolidation can also be beneficial because it spreads out your loan so that your payment every month will be lower. Keep in mind that this also means that you end up paying more in interest because of the longer term.
Options for Federal Student Loan Consolidation
There are numerous options available for the consolidation of your student loans. You have several different repayment options that you should evaluate as far as your individual needs.
- Standard repayment has less interest but higher payments. You pay a fixed amount every month for a period of up to ten years.
- Graduated payments start at a lower amount and then increase, usually every couple of years for a period of up to ten years.
- Extended repayment plans are either graduated or standard but the payments can continue for up to 25 years. When using this plan for your student loan consolidation your monthly amount will be less but you end up paying more interest.
- Income based repayment plans allow you to make a lower monthly payment that can be no more than 15 percent of your income. They can change with the amount of your income and can stretch to as long as 25 years.
- Pay as you earn repayment plans allow you to pay ten percent of your income and can continue for up to 20 years.
- Income contingent plans change every year based on your adjusted gross income, total loan amount and family size. They can continue for up to 25 years.
- Income Sensitive plans are also considered on a yearly basis by looking at your income and continue for up to ten years.
Consolidation of Your Private Loans
When it comes to the consolidation of loans that are held through private institutions you would go through a more typical process. It is based on your credit score and other factors of your financial matters. The same disadvantages and advantages apply for the consolidation of your privately held loans as the government loans.
It can be a little bit more work to find a lender if you want to pursue student loan consolidation for your private loans. You should compare things like interest rate, fees and penalties. Always do your research and shop around for the right institution for you.
There are services out there that can assist you in your consolidation process just like with any other type of loan. However, make sure that you don’t get taken in and keep in mind that federal consolidation is always free.
Wrapping it up
If you choose to consolidate your student loans then you will find a lot of advantages. You can make fewer payments every month, likely have lower monthly payments and you have many choices as far as the type of repayment that you are making. It is always a better idea to pay your loans as you are if you can if the term is shorter than it would be through consolidation, so do pay attention to that factor.