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Though it is true that student debt can be a heavy burden, you should never get behind on your student debt as student debt is not easy to get rid off. Some student loans cannot be discharged even with bankruptcy. Learn how to avoid getting behind on your student debt payments and how to get back on track if you’ve already got behind.
Student Debt Consolidation
An average American has about 11 credit cards or more and there are different interest rates on each. Making a payment on all could go out of hands at times. This can be consolidated. The term is better known as debt consolidation. Debt consolidation takes care of all your loans where a big loan is taken to consolidate all the other accounts and the payment is spread over a longer period of time, generally 10 years.
Student Loan Consolidation also known as Student Consolidation Loan is also on similar lines of debt consolidation. In this case, all the student and parent loans are combined in to one big loan where the lender is one and the smaller loans are paid off with this loan. Many students do not find the payment for the federal loans. In case of the debt consolidation loan, the interest rate is slightly higher and the students may find it difficult to pay them off. There are other options like the income contingent payments, which are adjusted to compensate lower monthly incomes. Graduate repayment facility is another option as the payments in the first 2 years of graduation are very low.
Different Loan Options
Debt Consolidation Loans are available for all kinds of loans. Student loans, private loans, direct loans, health loans, professional student loans, guaranteed student loans and most of the federal loans inclusive of FFELP, FISL and Perkins can be consolidated.
Student Consolidation Loans are of great help to the students as they get to pay very low interest rate on the loan and the re-payment is spread over a longer period of time. If a student consolidates his\her loans before re-payment, the interest rate is a very low one, which is a lower in-school interest rate. This saves a student 0.6%, as 0.12% is the average. The in-school interest rate is 1.7% and the 91-day Treasury bill. At the time of re-payment the interest rate is 2.3% plus the 91-day Treasury bill. The US Department of Education and the Federal Register have confirmed this imbalance. This is seen as a loophole.
In standard federal loans the debt consolidation loans reduce the monthly payments as they get spread over a longer time-period, usually for 10 years. The loan re-payment period can also be increased from 12 to 30 years depending upon the size of the loan. Most of the time the loan of less than $7500 can be repaid within 10 years, 12 years for more than $7500 to $10000, 15 years for $10000-20000, 20years for $20000-40000, 25 years for $40000-60000 and 30 years for $60000 and above. If seen logically, the interest that we pay becomes more with an increase in the number of years. There are many ways in which the payments and the term for payments can be negotiated.
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