Student Loan Consolidation Lowdown

With changing times, repayment option ways have changed too. The possibility of clinging to one way of repayment option like the fixed or equal payments spread over a specific term is no more. This option is still available but not the only one. You can now choose from many because of the increasing number of students require loans to finance their academic dreams. The situation is such that with increasing amount of students’ debt, lenders take it as an opportunity to offer flexible repayment plans giving a flexibility factor to financial matters.

Among many such plans are standard repayment plan where one pays a fixed amount each month for a particular number of years. In graduated repayment plan the payments start out low in the early years of the loan but increases in later years by the time a student fits into a constant income mode. Then there are extended repayment, income sensitive repayment plans for students to pick from where time factor and earnings decide your repayment mode, respectively.

Going for the Federal Consolidation Loan Program enables borrowers to some key benefits. These benefits act as a lucrative option as they cut the monthly student loan payments by up to 50 percent, leaving them with more disposable income to meet other expenses. Also, it allows combining all payments into one simple and convenient monthly bill. The benefits doesn’t cease there. It reduces the interest rate when payments are automatically deducted from a checking or savings account and deduct student loan interest on their federal income taxes (in many cases). One could also earn cash back for on time payments.

Student loan interest rates are variable until consolidated when it comes to Federal loan program. Experts predict that rates would increase by 2.5 percent on July 1, 2006. Thus it is a clear indication that by consolidating now borrowers can avoid the risk of higher rates and payments. The application process is simple, and there are no credit checks or processing fees.

Taking a student loan is a necessity that most students cannot do without. However, that doesn’t mean you should reel under a debt spell from which there is no escape. Yes, debt is inevitable but there are a few things you can do to reduce your debt burden. One of the first things you can do is understand your financial aid package. Some scholarships or grants require students to maintain a certain grade point average or some other caveat to keep their funding.

Students should not stop exploring grant and scholarship opportunities even after being accepted as a freshman. It may take an investment of time, but it can yield great benefits. Web sites and your financial aid advisor can offer places to look for these opportunities. Mywebtimes.com reports:

Do not borrow more than you need. While you may be preapproved for a certain loan amount, that doesn’t mean you have to take it all. And do not borrow money for unnecessary items, such as spring break vacations or a new car. All of that money has to be repaid — with interest.

Read more: 7 tips for taming college debt

I know this isn’t a good time to talk about life after college but as the interest rates are set to jump again, this is the perfect time to highlight the plight of the students. You are spending a big part of your youth pursuing higher education, taking ever-costlier loans to pay for this high-quality education. And THEN, you join the ranks of the educated poor who are trying hard to repay their student loans and make ends meet.

As interest rates are hiked yet again, this is one story that will be repeated time and again unless some action is taken. Today, many people in their 30s and 40s are forced to watch their budget minutely, juggle bill payments and live from one month to the next. They just don’t have enough money to save up for that retirement that they richly deserve, and many of them go without what we would consider basic necessities today: dishwasher, cell phones, cable TV, new cars… the list is endless.

And here is the worst bit: Experts don’t see the situation getting any better in the near future. According to statistics, around 40 percent of students are graduating with ‘unmanageable’ debt loads. In lay terms, this means that their salaries will not be enough to help them pay back the loans.

Of course, a college degree many give a student a higher earning potential, but a costly education has its downsides as well. Burdened by student loans, many graduates are staying away from socially critical jobs like teaching and social work and are looking for well-paying jobs that will help them repay their loans in real time.

This one isn’t about consolidating your student loans, so you can relax and stop worrying about interest rates. But every student needs to worry about one thing — debt, especially credit card debt. Being in debt has become a way of life for a majority of Americans, and we begin young — you’re just out of high school and if you want to study any further, you need loans and have to begin thinking of repayment. And there are other expenses as well like tuition, food, rent, and other incidental expenses. Only a student knows how difficult it can be to make ends meet.

One thing that you will notice once you enter college is how credit card companies solicit you and make you take their cards. Reason? For one, young people don’t usually have a credit history. College credit cards are a good and often necessary option for many students, but you can easily fall into a debt trap if you are not careful. All it could take is a few beers extra or buying something that you really wanted. What can you do to keep your debt within limits? Three things:

1. Never neglect to pay the minimum payment on your college credit card as it can quickly develop a bad credit rating that will prevent you from obtaining future credit cards, lines of credit and other funds.
2. Never roll over: To build favorable credit ratings, spend regularly on your student credit card, AND pay the balance off each month before it has a chance to roll over.
3. Stay within your budget: If you are a super rich brat, this advice isn’t for you. But if you are one of the regular guys, you must know your limits and stay within them.

Confused with all this clamor about consolidation and don’t know if it is for you? Well, take a deep breath and then contact your school/college counselor to know if consolidation will work for you. Yes, the deadline is almost here, but don’t jump just because everyone else does so. Msnbc.msn.com reports:

If you just graduated this spring, by consolidating now, you may have to start paying your loans back sooner.

Read more: Student Loan Consolidation

While just about everyone is on about the benefits of consolidating, quite a few people want to know what happens if you DON’T consolidate. Well, for one, not consolidating to a fixed-rate loan will leave recipients vulnerable to possible future increases in variable rate loans, according to experts. Toledoblade.com reports:

After July 1, Stafford loan rates will be locked at an average of 6.8 percent, while variable interest rate loans can still increase up to 8.25 percent in future years. The legislation will set a fixed rate for any new loans or consolidated loans and will also prevent students who are not graduating from consolidating after June 30.

Read more:Student loan rates to increase 2 percent

In reel life, all college students have to worry about is getting through college, finding themselves a soul mate and having a good time. In real life, they are a depressed lot, their enthusiasm dimmed and subsisting on cost-efficient fast food so that they can save up some money to pay off their debts. Painful? The truth always is. The realities of college life quickly quash many graduates’ sense of idealism. The harsh truth is that bearing the burden of student loans can be overwhelming.

Of course, the number of agencies that provide aid is growing rapidly. But this growth is somehow unable to prevent an increasing dependence on borrowing money, according to the College Board. Mtv.com reports:

Graduates are soon saddled with debt during a financially fragile period of their lives. In fact, a recent survey titled "The College Debt Crunch" revealed that 42 percent of responding college graduates with student loans live paycheck-to-paycheck. Meanwhile, desperate times call for desperate measures: 34 percent even claimed to have sold possessions to make ends meet.

Read more: This Is The Real World? Debt Drives Grads Back Home With No Plan

This is an annual feature: parents and students wondering about the big consolidation question. While most students this year will not have to think too long before saying yes, there are still quite a few people out there who haven’t been able to demystify the consolidation conundrum. Heraldnet.com reports:

Recent changes in federal legislation will prohibit in-school borrowers from consolidating beginning July 1. This is why if you are in school, you need to beat the June 30 deadline. I should also note that federal student loans first disbursed on or after July 1 will now have a fixed interest rate of 6.8 percent for the life of the loan. This fixed interest rate will apply to both in-school/grace and repayment periods.

Read more: Demystifying student loan consolidation

As July 1 draws nearer, the clamor for consolidation is increasing. Increasing numbers of so-called student experts are giving their two bits on the situation and are trying to influence students. There have been quite a few articles about consolidation, benefits and drawbacks. Some of these reports mention closing costs as a factor to watch for when consolidating a student loan. Here’s an important tip for students who are planning to consolidate their student loans.

Students should note that there never are closing costs when consolidating a federal student loan. You should also realize that when you consolidate, you are essentially agreeing to increase the term of loan from 10 years to nearly 25 or 30 years. This will of course lower the monthly payments considerably, but it will also increase the overall interest you will be paying during the life of the loan. Also, you must realize that when you consolidate, you might as well take your entire working life to repay your loan — 30 years is a very long time.

If you want to lock in the rates then there is no better option than consolidation. But if you are not prepared to repay your loan over a 25 or 30-year period, you could try an alternative. One of the best things to do in such a situation is to lock in the lower interest rate, and then attempt to pay the loan back within the original term. This will reduce the interest costs AND you will be rid of your student loan in just 10 years — a worthy bargain if you ask me. And the best part is that there’s no early payment fee with federal student loans.