School's Done, How Will You Pay Back Your Student Loans?
(ARA) - Every May and June, thousands of young people march across the stage to accept their diplomas and begin the rest of their lives. But as they embark on this journey called life, many will carry a big burden with them.
A recent study by the National Center for Education Statistics shows that about 50 percent of recent college graduate have student loans, with an average student loan debt of $19,000. Many undergrads, though, have debt exceeding $40,000.
Come December and January, the six-month grace period will be over and those debts will have to be repaid. Afraid you won't be able to afford them, in addition to rent, the mortage, the car and all those other new expenses you've taken on? If so, now would be a good time to start looking into student loan consolidation.
When you choose this option, a new lender arranges to have all your existing loans fully paid off and issues you one new loan. Generally there are no application fees or credit checks required for consolidation loans and by consolidating your loans you can benefit in the following ways:
* Lower monthly payments. By consolidating your federal student loans, you can take advantage of lowering your monthly payments which will give you more money to use for other expenses such as rent or mortgage payments, food and car expenses, utility expenses and credit card payments. Depending on your balances, you might be able to reduce your monthly payments up to 45 percent.
* One payment per month. If you currently have loans with multiple lenders, you know the hassle of having to write several checks per month, each for a different amount and to a different lender. By consolidating, you eliminate the need to make multiple monthly payments. You will only have to write one check or make one payment each month!
* Lock in a low fixed interest rate. Currently, unconsolidated federal student loans may have a variable interest rate which changes each year. By consolidating, you can lock in a fixed interest rate which remains constant through the life of the loan.
* Customize a Payment Plan. By consolidating your student loans, you have the opportunity to choose a payment plan and payment term that fits best with your current income. In some cases you can take up to 30 years to repay and you can change the plan annually without any penalties. In addition, if you decide you would like to repay your loans early, there are no prepayment penalties.
* Maintain your deferment and interest subsidy benefits. By consolidating your loans, you do not give up your deferment options or interest subsidy benefits on any subsidized FFELP or subsidized direct loans that you consolidate.
When Should I Consolidate?
You can do a student loan consolidation during your grace period or during repayment. You might even get to do a consolidation before you graduate. The timing depends on a variety of factors.
* Consolidating during the grace period may get you a lower rate
* You don't want to consolidate too soon after graduation. If you do, you might lose out on some interest subsidies
* If you think interest rates are low, you might lock in the rate
* If you want a lower monthly payment today, you might try to get an extended repayment plan
Want to find out how much money you could save by consolidating? All you need to do is gather all your student loan statements, then click here and fill out a form for a free rate quote.
Copyright © 2007, ARAnet, inc.
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