Debt Consolidation for Student Loan

The public’s interest in debt consolidation for student loan debt is rising steadily with each graduating class in the United States. For those facing debt consolidation for student loan payments, the economic strains and stress prove all too common and familiar among your peers. According to the National Center for Education Statistics, 65% of students will leave college with student loan debt in the first decade of the new millennium, which is a 16% increase from the previous ten years.

Considering debt consolidation for student loan obligations?
Find more information on debt consolidation for student loan repayments here.

Some student loans eligible for consolidation by the Department of Education include:

• Direct Loans
• PLUS Loans
• Graduate/Professional PLUS Loans
• Stafford Loans

Contrasting the high figures related to student debt, the National Association of Colleges and Employers notes the vast majority of college graduates make less than $50,000 after graduation. Keeping both these figures in mind, a large number of students financially struggle to maintain balance during their initial years out of college. Directly correlating to financial insecurity of recent graduates is the impeding or current obligations on varied amounts of loan repayments, which generally commence six months after graduation or leaving school. For most students, debt consolidation for student loan troubles may seem like a welcome option for graduates struggling to pay off multiple loans every month, but before consolidating, students need to consider the type of loans they have borrowed.

The United States Federal Government, through its Department of Education, offers American college students and recent graduates the option of consolidating their student loan debts. The terms, interest rates, and repayment options on these loans are the epitome of optimal within the lending community. One caveat to consolidating loans is the type of loans students are able to consolidate within the beneficial guidelines offered by the government.

Debt consolidation for student loan payments may lower the amount one pays each month, but it could potentially cost students more as well. If one lengthens the life of the loan by consolidating, the debtor will ultimately pay more interest. For example, assume a student takes out $5000 in Stafford Loans each semester until graduation after eight semesters. With a standard repayment plan of ten years with the eight, fixed 6.8% interest rate Stafford Loans, the student will repay $55,238.63 in cumulative repayments. For refinancing debt consolidation of the same eight loans with refinancing for a term of twenty-five years, the monthly payment will be and the cumulative repayment would be $ 90,527.57; a staggering differential of $35,288.94 between the two loan consolidation terms. Be carefully informed and know the terms when considering consolidating.

In addition, private loans and government-backed loans have different interest rates. Whereas federally backed loans carry fixed interest rates of about 6.8%, private loans carry higher interest rates, which may be variable. Consolidating student loan debt can ease the uncertainty of variable loans by refinancing all debts into fixed-interest rates. Although a financially struggling graduate might not wish to be reminded, discharge of federal, private, or alternative student loans is not permissible during bankruptcy proceedings. In addition, loans with late payments or that are in default can cause serious credit score reductions. In time such as these, consolidating school loans is the only fiscally responsible option for prudent graduates and students. The federal government, as well as private lending companies receiving subsidies from the federal government, offer graduates or recent students low-interest consolidation loans. Consulting help when facing financial crisis due to school loan debt is highly advisable for any person.

Considering debt consolidation for student loan obligations?
Find more information on debt consolidation for student loan repayments here.