Real Life Debt Solutions With College Loan Consolidation

Real Life Debt Solutions With College Loan Consolidation

by John Doyle

If you made it through college unaware of how highly the debt was accumulating, odds are good that you have now figured it out. Thankfully, with college loan consolidation programs, you do not have to worry.

Most people do not take full notice of their student loan debts until after they graduate and receive their first bills. Then the realization sets in of how much debt has been accrued, and how hard it is going to be to stay on top of so many loans. Fortunately there is help out there for those who need it in order to repay their loans. That help is available in the form of college loan consolidation.

There are two general types of education loans, private and federal. Both types are loans that must be repaid. If you have just graduated, and are only beginning in the job market, it may be hard to stay on top of all the payments. Making it worse is the fact that if you default on any of the loans, your credit will be marked with a negative score, and it will become considerably more difficult to apply for and obtain future credit.

A loan consolidation presents a very real chance for student loan debtors to pay for their college loans. What it does is to combine all your college loans into one single debt account and thus, all the payments are paid for through one payment each month.

There are many college loan consolidation companies mushrooming on the Internet today, and it pays to compare interest rates and loan terms. The single monthly payments under college loan consolidation programs are always lower than the total monthly payables on unconsolidated loans. This is made possible through a longer payment term than your typical college loan - from 10 to 30 years.

With some loan consolidation providers, a federal consolidation loan will reduce your monthly payments greatly, by up to 53%. For private loan consolidation, you are offered interest discounts based on other criteria, like on-time payments and automatic debiting from your bank account each month.

Private and federal loans can not be consolidated together, as the rules governing each are different. If you have both types of loans, you need two different consolidation programs, one for federal loans and one for private loans.

With some providers of federal college loan consolidation programs, the terms are more forgiving under certain conditions. You can actually get some percentage off the interest rate if you set up an automatic debit system for payment (some providers offer a .25% reduction in interest rates). On the other hand, you will not be eligible for a private college loan consolidation if your debts do not total at least $7,500.

If you do the math, you will find that you end up paying more by consolidating your student loans, because of the longer payment terms. However, if you do not consolidate, you must pay the loans off in higher payments over a shorter period of time, and you will have to try to negotiate with your creditors one by one to try to get better rates or terms of payment. It will not always be possible for you to tip the scales in your favor for every loan.