When faced with a large amount of debt, many graduates consider a student loan consolidation as a solution. Student loan consolidation involves taking all the loans borrowed and consolidating them resulting in one monthly payment. Although the process may seem simple, there are several aspects of debt consolidation that can prove to be complex. Exploring student loan consolidation options and following some basic tips and guidelines will assist you in making the best decisions regarding your student loan debt consolidation.
According to a study performed by the 2008 College Board, two out of every three students graduate with some type of student loan debt. On average, this debt amounts to $22, 700 for each graduate. This is a staggering amount of debt to take into the workforce while seeking employment. It can become oppressive when these loans become due immediately and requests for payments begin upon graduation. Student loan consolidation is one option that many graduates turn to for help. However since federal loans cannot be consolidated with private loans, this adds complexity to a seemingly simple solution.
Another point of note when considering a student loan consolidation is that interest rates add up over time when the repayment terms are extended. This causes the total amount of debt owed to increase when the life of the loan is extended. It is a price many are willing to pay in exchange for momentary relief from crushing debt. Most people assume that as time goes by, their salary will increase and they will be able to pay off their debt at a faster rate. This is a gamble some borrowers are willing to take as the immediate relief they get from debt consolidation seems to offset the fact that the loan will become larger over time.
Recent changes to student loan laws may offer some relief to borrowers as new laws have been implemented. These changes are that borrowers of student loans are now able to opt for an income based repayment plan. This allows them to only pay each month what they can afford based on a pre-determined scale. For private loan borrowers however, student loan debt consolidation may seem as though it is a viable way to lower their monthly payments and organize finances. Another benefit to consolidating a private student loan is that the co-signer can be removed from the loan after consecutive payments have been made during a 24 to 48 month period.
The decision to consolidate debt is a personal one and many graduates use this option out of necessity. However it is best to investigate all other potential options beforehand such as forbearance or deferment in the case of federal loans. It will be beneficial to meet with a credit counselor who can explain the benefits and disadvantages of a student loan debt consolidation. Taking these tips and guidelines into consideration can help you decide if student loan debt consolidation is the best option for you.
Source: Student Loan Consolidation Tips