According to the Project on Student Debt led by Institute for College Access and Success (TICAS), the average borrower for the class of 2012 will graduate with a debt of $29,400. This figure is up from its previous study for the class of 2011 which had $26,600 in the red.
Thankfully, there is a clever way of not only managing your student loan payments, but also to increase the time for those payments. This is done through a certain refinancing program called loan consolidation. Through student loan consolidation, you can combine multiple student loans into one or more larger chunks of loan under different terms of agreement. The major benefits of consolidating student loans are:
Benefit #1: Consolidation Avoids Hostage Troubles
Consolidation refinances your select loans by lumping them under newer terms of agreement. As a result, you have a single fixed interest rate for the entirety of the loan term. This allows you to free yourself of the anxiety caused by fluctuating interest rates due to the drama in the Congress.
An example in focus is the Congress led debate over “how to best deal with student loans”. This resulted in doubling the interest rates for the Stafford loans from 3.4% to 6.8%. Though this interest rate has been kept steady for two years now, the rates are set to rise after 2015 (8.25% and 9.5% for undergrads and grads respectively).
Consolidating loans will not only reduce the net interest you will have to pay, but also fix that interest rate for the entirety of your loan’s terms. As a result, you can easily predict the total interest payment and the monthly payments you have to make. Hence, you will be able to set your financial goals for each month easily and even save money for other investments.
Benefit #2: Once Upon a Month without Default
Since consolidating packages different loans under a single agreement, it also combines your payments for individual loans into a single payment.
The advantage is that you will not have to keep track of multiple payments or write multiple checks. Furthermore, you can set your payments to be taken out automatically from your checking account every month. This helps you stay organized and prevent any case of defaulting on your loan due to missed payments. Defaulting can severely damage your credit score and make it hard to get a mortgage, credit card, or a future loan.
The Consumer Financial Bureau reports that over 7 million borrowers are already in default and half the student loans have been deferred. With 70 percent of the graduates in debt, student debt has soared from $260 billion to $1.2 trillion over the past decade.
What’s more is that if you are having any problems in making your student loan payment, you still have the option of deferring your loans or to ask for forbearance for six months.
So then, get down to organizing your paperwork! Research the proper loans to consolidate, avoid mixing certain federal loans with private loans, and whenever the work feels overwhelming, get in touch with a student loan consolidation service!
Sources
http://projectonstudentdebt.org/files/pub/classof2012.pdf
http://www.projectonstudentdebt.org/
http://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/
http://www.degreesource.com/top-reasons-to-consolidate-your-student-loans/
http://www.forbes.com/sites/specialfeatures/2013/08/07/how-the-college-debt-is-crippling-students-parents-and-the-economy/
