Loan Consolidation: Is Student Loan Consolidation Right For You?
Making it through college is a tremendous accomplishment and you should be proud of yourself. While your degree makes you more valuable on the job market, your credit probably took a bit of a beating by way of student loans - am I right? Sure, without them many people wouldn't have been able to afford college in the first place, but now that you're out and on your own, what do you do about that mountain of debt? Fortunately, there are student loan consolidation programs to help you manage your debt without going broke in the process.
What is a student loan consolidation program?
Simply put, a student loan consolidation program helps you to consolidate or combine your debt so that you can make one payment every month. In most cases this can reduce your monthly expense by up to 50%, though the amount of your loan and the program you work with will dictate your precise savings. In addition to one payment, it is also possible that you might qualify for a lower interest rate, saving you even more! By consolidating your student loans, you are helping improve your credit score because each of the individual loans that are part of the program will be reported to the credit bureaus as paid in full, leaving you with one loan on the report.
Do defaulted student loans qualify for consolidation?
Not all consolidation programs accept loans that are in default, but there are programs that are designed specifically for that purpose. In order to take advantage of these programs you will most likely be required to join a credit counseling program that will help you to make better financial decisions while rebuilding your credit. Learning to manage your money isn't something most people want to do, but it will benefit you in the long run, especially considering those defaulted loans that will be paid off and the hassle of constant mail and harassing phone calls will be eliminated while you and your consolidation counselor work together to repair your credit.
Federal Student Loan Consolidations
Even student loans that were issued by the government (as opposed to a bank) are eligible for federally backed consolidation programs. You probably already know that most government loans have a lower interest rate and they are usually easier to get than conventional loans, so its good news all around.
By consolidating all of you student loans, you are lumping them together into one loan that will usually qualify for a lower rate of interest because of the higher loan amount. Though the life of the loan will probably be extended (meaning that it will take longer to pay it back), you will benefit from paying less money out of pocket every month. As we all know, new college graduates will not always make the greatest salaries right out of school, and spending less money while you're trying to get a foothold in the job market is a good thing.