Student Loan Consolidation Lowdown

A recent survey by college debt financier Nellie Mae shows that students are getting smarter about their use of credit. But there is no stopping them from getting even smarter. What says? If you are a new student, here are a few tips that will help you tide through the initial rush of credit cards and teach you how to identify the card best suited to your needs:

Discuss with your parents: I know this doesn’t sound cool. But sometimes, it may not be such a bad idea to discuss the various card offers you get with your parents. Especially if they are going to handle your credit card bills.

Don’t get intimidated: They will not force you to take their cards but the representatives can be quite persuasive. So be on your guard and don’t take a card just because it’s been offered to you. Try to compare the card offered with other offers and then choose a good card. Try to get a card wit no annual fees, a decent grace period before interest is assessed, and a good introductory interest rate.

Read up: Very important. Before you take that card, read up as much as you can about the particular cards offered to you as well as about credit card debt and other such issues.

Take control: Just because you’ve got a credit card, you needn’t splurge all the money. It is important to keep a check on how much you spend and where. Only charge what you can comfortably pay off every month.

Pay your bills: This isn’t a free party — you just have to pay for what you purchase. So be careful with your use of the card and try to pay off your bills as soon as you get them. This way, you can avoid hefty late fees.

You’ve applied for financial aid with many institutes and now, as the letters arrive, your wait is over. But that is not the end of the matter. Now is when you have to make the big decision. Once the financial aid award letters come, you have to decide which aid award will help you meet your needs best. You may be tempted to take up the first offer of financial aid, but it is better to wait until you get award letters from all the colleges before making a decision. This way, your decision will be better tailored to your needs.

But don’t take too much time deciding which financial aid package to accept. These packages come with a time limitation and if you don’t respond in time, the aid may go to another student. So, while you read each letter carefully, be quick on the response to get the best financial aid package.

Interest rates have risen considerably since July1 and there is quite a bit of confusion among students. The main reason is that they don’t know how to pay off loans taken at such high rates of interest. A large number of students try to defer loan payments using the only means they know of — by consolidating their loans. Of course, consolidation is quite helpful. It helps you by creating a single fixed-rate loan plan. However, some experts believe that in the long run, consolidation may not be beneficial as the cost of doing it can be detrimental to the student.

One of the main problems is the stretched out repayment period — something that you can pay and finish off earlier is stretched for too long. This may result in an escalating interest rate stipulated by the loan holder. Whatever the reason if you do want to avoid consolidating your debts you could try these methods to reduce the pressure of your debt.

One method I recently discovered is the graduated plan. In this repayment method, payments begin at a lower rate and increase every few years opposed to a monthly payment at a fixed rate for a 10-year period. Of course, this method does have its drawbacks. If you opt for a graduated plan, at some point of time, you may be paying the highest monthly payment on a program like this. Then there is the Standard repayment plan wherein you have to make both principal and interest payments each month throughout the loan repayment period. Then there are income sensitive loans where in the amount due each month is based on a percentage of your monthly income. The catch here is that this applies for Stafford, PLUS, and SMART LOAN (federal consolidation) borrowers.

The days leading up to July 1 saw a scramble by students trying to consolidate their loans, as interest rates would rise to 6.8 percent after this cut off date. Any student loans taken prior to that date will remain at a variable rate. Now that the consolidation drama has ended, many students are wondering if they did the right thing by consolidating their loans. Many more young students who will soon be entering the fray are also worried about their loan prospects.

So let’s get out the good news first: over the next several years, origination fees on student loans are scheduled to phase out. This means fewer fees on your student loans. Another benefit is that if you plan to pursue a graduate degree, a new PLUS Loan initiative will allow graduate and professional students to take advantage of PLUS funds. This means you will be able to cover your total cost of attendance with federally guaranteed, low-interest loans. This way, you can avoid alternative loans, which are usually more costly.

Agreed, there are benefits galore, but you can better your financial future by managing your student loans well. A few simple tricks are enough to ensure that you are on the right track to loan repayment and freedom. One of the first things you should realize is that student loan interest rates are variable - they change every July 1st. You can permanently lock in your interest rate by consolidating your loans.

Did you know that lenders offer a reduced interest rate when you make provisions to let your student loan payments get automatically deducted from your checking or savings account? This reduction in interest can lead to big savings and the added benefit here is that you will not have to remind yourself regularly about loan payments. If, for some reason, you have problems making your student loan payments, you should immediately contact your loan servicer to find out if you are eligible for deferment or forbearance.

If you’ve just graduated from college and entered the workforce, then your student loans are fresh in your account books and you are probably ready to pay it off as soon as possible. Delays in payment not only increase the loan amount it also creates a not too good impression. Of course, if unavoidable reasons cause the delay then you are justified in paying late. But remember to intimate your creditor and find out ways of delaying or lowering your monthly payments. In case you are determined to make your payments on time here are a few tips.

One of the first things you should do is keep in touch with your lender. If you are moving house, you must ensure that they have your current address so that you don miss any bills. Another thing, always pay on time. You could even get interest rate discounts for paying on time. One good method to ensure that you don’t slack up on your payments is by paying electronically. This way, your lender can take the money directly from your bank account.

Congress recently revamped the student loan program and has imposed a fixed rate of interest on all loans disbursed after July 1. This means the cost of borrowing for college just got higher, but students and parents can still save money by shopping for discounts. Sfgate.com reports:

Many lenders are offering discounts off these rates. The discounts start at various points in the loan’s life and usually require borrowers to sign up for automated payments and make a certain number of on-time payments. Some lenders also discount or rebate the 3 percent fee levied on Stafford and Plus loans.

Read more: It pays to shop around for student loan rates

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. 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.

Thousands of students are now filled with anticipation — of the time when they will be walking down the aisle. The graduating Class of 2006 is anticipating a new beginning, a new phase of their lives, which will be characterized by hardships they didn’t anticipate when they began the pursuit of their degree.

If you belong to the group that calls itself the average American student, you probably owe around $30,000 in student loans. And guess what, unless you have a really good plan up your sleeve, you’re going to begin a long and painful repayment period as soon as your six-month grace period ends. Unless of course, you can pay back all the money right away — I know what you’re thinking, “this person’s definitely nuts!” Well, that just underlines what I said, get yourself a good plan before it’s too late. Despite all the noise about consolidation not being too good an option, I still think it’s the best you got. I know it’s a bit too late in the day to be talking about consolidation for this year’s graduates, but there are more students in the pipeline who are wondering what they need to do — and I’ve got only one word of advice for these guys — consolidate.

Loans have become an integral part of a student’s life today. You just have to borrow to pay part or all of your educational expenses. But this doesn’t mean that you have to take up the first lender you come across. Just like any other type of loan, you can compare rates and options available before you select a lender for your Federal Stafford, PLUS and other education loans. This will not only help you take the loan on your terms, it will also help you save thousands of dollars. There are a few things you need to consider before you decide a lender is right for you:

Loan limits: Find out the limit of the loans offered by various lenders. In the case of Federal Stafford loans, your seniority determines your loan limit. So if you are a Freshman or Sophomore, your limit will be lower than that of the higher classes. In the case of private loans, they vary from lender to lender. So check all possible avenues before deciding on one lender.

APR: Acronym for Annual Percentage Rate, this is the annual cost of your loan. In addition to interest, APR includes fees and other charges. Your APR is calculated on the basis of your loan amount, time period that it will take to repay the loan, and other factors. The lower the APR, the more attractive the loan.

Repayment: If you are prompt in repaying your loans, quite a few lenders are known to offer incentives like reductions on interest rates. Check what incentives are on offer with various lenders. Also find out if your lender will allow you to defer payment while in school. Another thing you need to know is how long the lender will allow you to string out your payments. There are a few more things you need to check. I will discuss these points next time.

Better check your student loan status before you decide to live life on your terms. Ironic isn’t it: in what can be termed the freest country in the world, people don’t have the right to lead a life that most people in other countries would take for granted. It is extremely painful if you cannot take up the job of your choice only because it doesn’t pay enough to enable you to repay your student loan. But that does not mean you need to despair. The government and lenders have still left us a few straws that we can clutch at and drag ourselves out.

Ever heard of forbearance: a temporary suspension of loan payments that most lenders allow when times are tough. So, if you really had your heart set on that social service job in Ethiopia, which will give satisfaction and not much pay, just intimate your lenders. They may be able to work something out for you. You could use this method even when you plan to get married, buy a house or even plan a baby — anything that would put a strain on your finances. Another method is to extend your payment term. This will help you lower your monthly payments.

But if you do want to repay your money without breaks, then here is one repayment option that will help you manage your monthly payments — pay electronically. This way, you can always ensure that you pay on time! There are a number of benefits associated with electronic payments, in which the lender takes the money directly from your bank account. Payments are never late, so the borrower never has to worry about late fees. This also builds good credit, showing lenders that payments are consistently paid on time.