Is a Government Student Loan Consolidation right for you?
Government student loan consolidation is an option many students
from universities and colleges should look into and for all the
right reasons. Government student loan consolidation is a great idea to lock in
record low interest rates before the economy shifts and rates go
back, no matter if you are still an undergrad, matriculated, graduated,
game fully employed or unemployed.
If your monthly student loan payments are to high and you wish to
reduce the minimum payments than a government student loan consolidation
may be the solution for you. This will however extend the length
of your loan.
Even if you student loans are in default, you can still benefit from
a government student loan consolidation. Benefits of these loans
include protecting your credit rating scores. You save money over
the long term by locking in lower interest rates or lower monthly
minimum
payments. In many cases though, you will be extending the term of the
loan - just adding debt to your personal portfolio for years.
However, a government student loan consolidation may not be in your
best interest if you are close to paying off the balance. If you
can manage your existing monthly payments "stay the course" because
you will save money over the long term. Refinancing a loan close
to settlement is never a good idea when you have the ability to pay
it off in a reasonable amount of time.
If you have multiple student loans, a government student loan consolidation
will enable you to combine them and you will have only one monthly
payment while locking in a low interest rate. Ultimately, your
debts will be easier to manage.
There are four distinct government student loan consolidation plans
for you to choose from.
Standard Plan: The standard repayment plan offers a fixed-rate
plan with monthly payments of at least $50 for up to ten years.
Borrowers
pay less interest under this plan because the repayment period
is shorter.
Extended Payment Plan: The difference between this plan and a
standard plan is monthly payments are extended over a period
of 12-30 years.
If you have a high debt load this may help you reduce your
monthly payments but the longer you take to clear the loan, the
more
interests you will pay.
Graduated Payment Plan: Under this plan monthly payments start
out low and increase approximately every two years. The repayment
period
can be from 12-30 years depending on your debt load.
Income Contingent Repayment (ICR) Plan: Your monthly payments
via this plan are based on your income, family size and
loan amount.
Compare the cost of repaying your unconsolidated student
loans with the cost of paying a government student loan
consolidation.
It is in your best interest to examine and review your
government student loan consolidation options. Consult
https://loanconsolidation.ed.gov
and participating lending companies to discover if
government student loan consolidation is a viable option for
you.
Consolidating your
student loans can save you lots of money over the long
term, so it this is decision you have been contemplating,
take
the time
to do
additional research
Tips for reducing your studen loan payments:
Consolidate them into a single loan with rates and terms you can afford.
Pay more often than the schedule - you will reduce your over all interest.
Don't refinance if you are near the end of the term for your student loan.
Don't refinance if your just saving a few dollars a month - the additional time you are financing will cost you more in the long run.