Advantages of Consolidating Student Loans
Many students acquire several different student loans during college. Consolidating these debts can have several advantages. Lower interest rates mean lower monthly payments and savings of thousands of dollars over the life of your loan. Your credit score can be affected positively from debt consolidation.
You can get a federal consolidation loan if you have federal loan debt from a Perkins, Stafford or PLUS loan. You can consolidate these loans together, resulting in one loan with a lower interest rate. However, you can’t combine unsubsidized and subsidized loans together. There are a few stipulations when consolidating loans. You must be a graduate, or parent of a graduate, with at least $10,000 in loan debt. You should either be paying on your loan or be in a grace or deferment period. These consolidated loans are free to apply for, do not carry extra fees or prepayment penalties, and do not require a credit or employment check. This type of loan will also boost your credit score. You can take up to thirty years to pay it back, much longer than the ten year traditional repayment period of most student loans.
If you also have private loans in addition to federal loans, do not consolidate them together. If you do, you will have to consolidate with a private lender. Your loan will not be eligible for the benefits that federal loans receive. These include lower interest rates, tax deductions, and possible payment deferment if you decide to return to school.
You can further reduce the cost of your loans in several ways. Many lenders have programs based upon your career that can lower your interest rates. You may also qualify for a reduction in your principal balance if you make timely payments. This can also help you to qualify for lower interest rates if you do consolidate, some as low as two percent. Private loans are a bit harder to maneuver. They often have higher rates and are much more difficult to consolidate if you have poor credit. An option for homeowners is a second mortgage or home equity loan. These often have much lower interest rates that may be tax deductible. You can also use the money to pay off high interest credit card debt that may have accumulated for school expenses.
There are different choices in repayment of your loan as well. A traditional loan can be paid off with set payments over time. An accelerated payment can be used to lower your cost the first year or two. The subsequent years see an increase in the payment, often a significant one. For instance, if you have a $15,000 loan, you can have a payment of about $80 a month for two years, and then the payment jumps to over $400 the following years. This may be something to consider if you don’t have a good paying job right now but expect to get one later.
Debt is easy to come by but not so easy to get rid of. However there are many ways to reduce your out of pocket costs and save money in the long run. You can consolidate your student loan debt to save money, raise your credit rating and get started toward a great future.
Advantages of Consolidating Student Loans
Many students acquire several different student loans during college. Consolidating these debts can have several advantages. Lower interest rates mean lower monthly payments and savings of thousands of dollars over the life of your loan. Your credit score can be affected positively from debt consolidation.
You can get a federal consolidation loan if you have federal loan debt from a Perkins, Stafford or PLUS loan. You can consolidate these loans together, resulting in one loan with a lower interest rate. However, you can’t combine unsubsidized and subsidized loans together. There are a few stipulations when consolidating loans. You must be a graduate, or parent of a graduate, with at least $10,000 in loan debt. You should either be paying on your loan or be in a grace or deferment period. These consolidated loans are free to apply for, do not carry extra fees or prepayment penalties, and do not require a credit or employment check. This type of loan will also boost your credit score. You can take up to thirty years to pay it back, much longer than the ten year traditional repayment period of most student loans.
If you also have private loans in addition to federal loans, do not consolidate them together. If you do, you will have to consolidate with a private lender. Your loan will not be eligible for the benefits that federal loans receive. These include lower interest rates, tax deductions, and possible payment deferment if you decide to return to school.
You can further reduce the cost of your loans in several ways. Many lenders have programs based upon your career that can lower your interest rates. You may also qualify for a reduction in your principal balance if you make timely payments. This can also help you to qualify for lower interest rates if you do consolidate, some as low as two percent. Private loans are a bit harder to maneuver. They often have higher rates and are much more difficult to consolidate if you have poor credit. An option for homeowners is a second mortgage or home equity loan. These often have much lower interest rates that may be tax deductible. You can also use the money to pay off high interest credit card debt that may have accumulated for school expenses.
There are different choices in repayment of your loan as well. A traditional loan can be paid off with set payments over time. An accelerated payment can be used to lower your cost the first year or two. The subsequent years see an increase in the payment, often a significant one. For instance, if you have a $15,000 loan, you can have a payment of about $80 a month for two years, and then the payment jumps to over $400 the following years. This may be something to consider if you don’t have a good paying job right now but expect to get one later.
Debt is easy to come by but not so easy to get rid of. However there are many ways to reduce your out of pocket costs and save money in the long run. You can consolidate your student loan debt to save money, raise your credit rating and get started toward a great future.
