Student Loan Consolidation Lowdown

If you haven’t noticed already, here’s confirmation of a trend that started only recently: youngsters who have graduated from university are returning back home instead of going it alone. What’s driving this return home? Debt of course! Today, there a few tough financial lessons confronting many young people saddled with consumer debt and increasingly hefty student loans. According to Student Monitor, a New Jersey research firm that specializes in the college market, a graduate’s average student loan debt at $25,760. This will take an estimated 8 years to pay off.

Most of these students can ill-afford the cost of living alone and moving home is probably the only option left to them. If they tried to pay rent that would be just extending the amount of time it would take for them to pay off their student loans. And living within a budget becomes a priority for these recent graduates. Low starting salaries, minimal savings can only complicate matters. Washingtonpost.com reports:

Financial planners say that for those who live at home, saving money should be the top priority. Shashin Shah, a financial planner with SGS Wealth Management in Texas, advises young adults living at home to sock away at least 10 percent of their salary. That should be done in part through a 401(k) if offered by their employer.

Read more: Strapped Grads Get Financial Lessons on Familiar Turf

I recently wrote about Michigan house democrats who claim to have a plan, which would pay back interest on student loans, if those students work in certain high-tech fields. One of the reasons for this proposal is that it will help turn around Michigan’s economy and will benefit the state greatly. Wlns.com reports:

Representative Diane Byrum says an educated workforce living in Michigan is vital to turning around Michigan’s economy. Dianne Byrum: "It will serve as a magnet to attract those businesses which will help diversify Michigan’s economy."

Read more: More Details on Interest-Free Student Loan Proposal

It is a given that most students cannot pay for their education and that they require loans. However, there are a few of them who have bad credit and are in quite a bit of need. How can they procure loans on good terms? Though it may not be easy to get loans with lower rate of interest, you CAN get a bad credit student loan. Market-day.net reports:

The best time to start getting information about bad credit student loans is your junior year in high school. In order to determine the exact amount of the loan that you would require, you should research thoroughly on the various available schools, and also on the courses in which you are interested.

Read more: Can I Get A Bad Credit Student Loan To Fund My College

Want to consolidate your loans quickly and easily? Well, then instead of doing the rounds of consolidators’ offices or calling them up, why dont you try the Internet — you can research and compare offers and make an informed choice. Bestsyndication.com reports:

Secondly, visit a web site where you can learn about the latest trends in debt consolidation for student loans. Additionally, you can contact their financial advisors, who will walk you through the debt consolidation process and make sure that you save as much money as possible paying back your student loans.

Read more:Why Now Is The Best Time To Consolidate Your Student Loan

There is a bigger drama to the rise student loans, than just the percentage hike in rates. This drama that will change the way America is and will be in the coming future, and all this will be thanks to student loans. No, I’m not being melodramatic. Just ask any student about how they plan to repay their loans and what they plan to do once they’ve repaid. All you will get are confused stares. Because they don’t know when they’ll finish paying off their student loans — probably by the time they are in their mid-50s.

And how will they live their lives till then? They will have to kill all their dreams and search for that really high paying job. And the students who cannot find themselves good jobs, will have to work two or three jobs to make ends meet after they’ve paid their loan installment. And what about a home, family, children? You must be joking? Most collegians will not be able to begin thinking about buying a home or even about marriage till they are into their mid to late 30s. And then even if they want to have children, they will be forced to restrict themselves to one or none at all because of the rising cost of education.

And the worst part, society loses a great deal. Vital, but low-paying professions are being given the boot by students who cannot afford to indulge in them. What we lose out on are potential social workers, pro bono lawyers, journalists, environmentalists, teachers, artists, secondary medical professionals and community workers! This is too big a loss to even begin comprehending. I hope our lawmakers are listening.

This seems to be snowballing into a major controversy. I really don’t know what to make of it. I mean it could be true that the big lenders are really bogged down and cannot speed up the process so that students can switch financial institutions. Tens of thousands of undergraduate and graduate students DID rush to consolidate their federal student loans this spring and summer, trying to lock in lower interest payments before higher rates took effect on July 1.

I mean just the sheer numbers could’ve been enough to crash their workforce, methinks! But frustrated students think otherwise, and so do executives at some of the companies that process the applications. They are accusing big lenders like Wells Fargo, Wachovia and even Sallie Mae of violating federal regulations and slowing the process, charging the higher rates in the meantime. One such company even complained to the Education Department, which is now looking into the issue. Tech-mit.edu reports:

Banks and other lenders say that if there are lags in processing applications, they are the result of the sheer number of students who have applied to consolidate their loans; one consolidation company received 40,000 applications in June alone. There is no central database that tracks the pace of consolidation activity.

Read more: Sluggish Service Claim After Rush For Loan Consolidation

NextStudent, a major student loan consolidation lender recently doubled its loan processing staff to combat the delays in getting back Loan Verification Certificates (LVCs) from other major student loan companies. At present some of the major student loan lenders are dragging their feet and are taking their time to return the LVCs. These certificates are required to complete the student loan consolidations currently in process.

The rush to consolidate student loans prior to the July 1 deadline, when interest rates increased nearly 2 percent, created a backlog in consolidation applications across the industry. Some major lenders are reported to be using delaying tactics to prevent students from completing their applications with the lender of their choice. This increase costs for students, as they still are responsible to pay off their current loans until the consolidation is complete. This means the students have no option but wait it out while their loans hang in balance. NextStudent is trying to correct this problem by employing more resources to process the loan applications that will be released by other lenders.

Is your financial aid expert trying to convince you that private student loans are the logical alternative to federal aid in affording higher education? There is probably one thing s/he’s forgotten to tell you — that these private alternatives can be more damaging to borrowers than beneficial if used as a substitution to federal aid rather than a supplement. Youngmoney.com reports:

Private student loan holders forego other vital benefits afforded federal loan holders. For instance, if a federal student loan holder becomes disabled or deceased, the loans are forgiven making repayment unnecessary. Private loan holders’ heirs would have to repay the loans in full from the deceased’s estate.

Read more: Private Student Loans: Pros and Cons<

Enough and more has been written about the student loan problem, which has gotten extremely bad in recent years. Now several major universities are finally doing something dramatic about it. The Observer Online reports:

In response to the problem, several schools are using university funds to reduce or eliminate that loan burden for students with demonstrated need. Harvard does not ask parents earning less than $60,000 a year to contribute to their child’s education. At Yale and Stanford, the figure is $45,000. The University of Pennsylvania replaces loans with grants for students from families with incomes under $50,000. Virginia, Brown and other institutions are taking similar steps.

Read more: Student loan troubles

While this one is about student loan, it is more about how parents can actually reduce the loan amount by saving up for their child’s education. One method of saving is by investing in a 529 college savings plan. However, many parents don’t do that because they worry that a 529 plan will affect the possibility of their child receiving any financial aid in the future.

Well, though the answer may have changed today, the basic premise about which the parents are worried, doesn’t stand up to scrutiny. If you plan to save up for your child’s education, will you change your decision just because your child may not receive aid in future? I’m sure the answer is No. Well, getting back to the plan, from July 1, a 529 plan — whether it’s prepaid or a savings plan—is considered a parental asset in the determination of federal financial aid. Washingtonpost.com reports:

Interestingly, a 529 plan owned by a student or within custodial accounts, which can be opened under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, is not counted at all in the federal formula.

Read more: Don’t Tie College Savings to Potential Aid