It is quite easy to get a student loan when you first apply to college. You probably did not really give much thought as to how quickly you would have to start paying back the loan.
Six months after graduation you are hit with this new monthly payment. Many times there is not just one payment, but several different loans you will need to repay.
You may have started working at a lower level position when first graduating from college. This may mean that your income is not high enough to cover your student loan payments.
One option when faced with this dilemma is to consolidate your student loan payments. Student loan debt consolidation is something you should be educated about before making any decisions. You want to make sure that it is the best option. Below is some information that can help you decide if debt consolidation is right for you.
Pros and Cons of Student Loan Debt Consolidation
There are many positive aspects of consolidating your student loans. On the flip side, there are some negative aspects you will also want to consider.
* The monthly payment would be significantly lower.
* The interest rate is capped at 8.25%. This means that you could save interest if the current interest rate of your students loans is higher than 8.25%.
* You would only be responsible to pay one monthly payment on your students loans rather than multiple payments.
* You may pay more in the end. This is because the loan is extended for a longer period of time.
* You may lose out on borrower benefits. This means if your student loan had benefits, the consolidated loan may not honor them.
As you can see, by consolidating your student loans you will have a lower monthly payment. On the other hand, you will pay on your loan for a longer period of time.
How to Qualify for Student Loan Consolidation
In order to apply for student loan debt consolidation, you must be sure that your current loans are paid up to date. If there are not, you should call your current loan providers and make arrangements to get the payments caught up. Then you can move forward with having your student loans consolidated.
There are no credit checks for obtaining a student loan consolidation plan. The loans themselves are pretty easy to obtain. You just need to decide if consolidation is the right option for you.
Types of Student Loan Consolidation
There is more than one type of student loan consolidation.
* Standard Repayment Plan: This plan combines your loans into one monthly payment that will last between 10 to 30 years depending on how much you owe.
* Graduated Repayment Plan: With this plan, your payments are quite low at first. Then they slowly they increase over time. This allows you to pay more as you gain job responsibilities.
* Extended Repayment Plan: This plan is available if your loans total more than $30,000. It allows you to pay the balance within 25 years using either the standard and graduated repayment plan.
* Income Contingent Repayment Plan: This payment plan is based on your current income, loan balance and family size.
* Income-based Repayment Plan: This plan is very similar to the Income Contingent Repayment Plan. The difference is that you must be having a financial hardship to qualify for this loan.
There is a lot to consider when applying for student loans consolidation. First, you must weigh the pros and cons of having your loans consolidated. If you choose to have your loans consolidated, you must then consider which repayment plan would fit your needs the best.
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Arian A. lives in New York and writes about many personal finance topics including student loan debt consolidation. She wants to help as many people as possible manage their finances better.