Student Debt Consolidation Repayment Programs

Student Debt Consolidation Repayment Programs

Student debt consolidation may be a simple concept but when it comes to the repayment programs on student debt consolidation loans, there are many alternatives to choose from and you should know them all in order to choose the one that best suits your needs and budget. Here are some brief explanations on the most common alternatives you'll find in the market.
The repayment program of student debt consolidation is probably the most important term since it will define how your loan will affect your financial life during the loan repayment and how much available income you'll have during the loan's different repayment periods. Thus, it is important for you to analyze the offers presented to you taking into account these succinct descriptions.

Identical Payments Repayment Programs

These programs guarantee that over the whole life of the loan, the amount of your monthly payments will remain the same. This provides certain reliability if you have a fixed income and stability on your job. However, in most cases income expectations tend to fluctuate and most of the time, they increase as years go by and you develop your career. Thus, if you are conservative in nature and you don't mind having to wait to become debt free, these might be the repayment programs for you.

Variable Graduated Payments Repayment Programs

These debt consolidation programs allow you to have low monthly payments the first few years by providing interest-only payments for a fixed period of time. Later, the repayment programs start to incorporate principal to the monthly payments till the degree of interests and principal is evened out to accelerate repayment of the student debt consolidation loan and reduce the amount of interests.

The length of the interest-only period ranges from one lender to another. The average loan provides a two year interest-only payment while there are some student debt consolidation loans that have a two year interest-only repayment program followed by a 3 year period where a small portion of principal is included and after that period is finished, the amounts are evened out.

Income Responsive Repayment Programs

These repayment programs take into account the variations on your income in order to determine your monthly payments. Most lenders adjust the amount of your monthly installments annually taken into account the previous year average monthly income and the increment or reduction expectations for your particular field in the upcoming year. These programs can be combined with Variable Graduated Payments Repayment Programs so as to make things simpler the first few years.

Broaden Repayment Programs

The length of the repayment programs can be extended to reach longer periods and thus reduce the amounts of your monthly payments even more. There are broaden versions of all the above repayment programs which implies that Identical Payments Repayment Programs, Variable Graduated Payments Repayment Programs and Income Responsive Repayment Programs can all be extended to reach up to 25 years in length.

You need to bear in mind however that by extending the repayment programs, though you may get lower monthly payments, you are increasing the overall cost of your consolidation loan and thus reducing your savings obtained by consolidating your student debt. This is due to the fact that the interest rate is measured annually and each extra year implies a whole interest rate cut added to your overall debt.