Less Pressure: Consolidated Student Loans
For most students that graduate from a two or four year degree program and then enter into the workforce, paying back student loans within the 10 year allowable time can be a real challenge.
Most students during this first 10 years after graduation will get married, have at least one child, change jobs at least once and will purchase at least one vehicle and most likely a house.
All these expenses can be difficult to manage on top of various federal and private school loans that may be outstanding.
One major option is to consolidate student loans, which means borrowing to combine your student loans, pay them off, then pay off the remaining single consolidated loan over a longer repayment period. The option to consolidate student loans is open to most employed graduates or even, in some cases, to students that are still in school but are in some way working to earn an income.
It is very important to compare how the consolidation and your student loans differ based on various interest rates, and it is equally important to consider all of your options.
A financial planner, consultant or even your regular banker can help you understand the advantages and disadvantages to consolidate student loans. Generally the biggest advantage to consolidate student loans is that it takes the multiple payments from different lenders you may have a literally pays off these loans, leaving you with one payment to make to the consolidated loan lender. In most cases, actually in virtually all cases, this one monthly payment will be less than the original multiple payments.
The reason that this can happen is when you consolidate student loans the time that you have to repay is significantly expanded, meaning that you have to pay less each month. In terms of student loans, the disadvantage lies in the longer term loan which in some circumstances could take up to 30 years to repay. By making the minimum monthly payment on a consolidated loan means you pay much more in interest in the long run, which could be a substantial amount depending on the interest rate and monetary size of the loan.
You can also lower the interest amount by paying more than the minimum monthly payment. However, it is important to distinctly specify that the extra payment is strictly for the loan principal. If you begin this when the student loan starts of soon after, you can rapidly cut payments off of your loan.
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This entry was posted on Saturday, May 30th, 2009 at 3:57 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.