The 4 Types Of Student Loan Debt Consolidation

In considering obtaining student loans, it is important that you pull together basic information about your finances and your financial status. (In addition, depending on the types of specific student loans that you are seeking, the income and financial status of your parents may play a role in decisions relating to student loans.

If you have several student loans to pay concurrently, it can be hard and financially difficult to manage. Luckily for students, there is the option to consolidate all your student loans together. We called it Student Loan Debt Consolidation.

What is student loan debt consolidation?

It simply means consolidating all your student loans into one so you only have to make monthly payments to one lender instead of several. The advantage is that you pay lower interest rates and most student loan debt consolidation have higher repayment periods.Tip! Having Fixed Interest Rates. With some federal consolidation loans, you can have a fixed rate for the life of your student loan.

There are many financial institutions and banks that offer student loan debt consolidation. They will pay off your existing student loans to their respective lenders. They will then consolidate the loans into one. The interest rate of the new student loan debt consolidation is then calculated by taking the average of the interest rates of your previous student loans. That is why your student loan debt consolidation’s interest rate is lower.

Some student loan debt consolidations are payable at a fixed rate though so be sure to check with your lender first.Tip! Having Simple Loan Payments. By consolidating your student loans, you only have one loan payment per month and one check to write.

There are 4 different types of student loan debt consolidation plans available from lenders each with its pros and cons.

1. Standard Repayment Plan

Standard Repayment Plan offers a maximum of 10 years to repay your student loan debt consolidation at a fixed rate. Payments are calculated by dividing the loan amount within that time period at a fixed interest rate.Tip! Extending Your Payment Period. You may have a lot of student loan debt.

2. Extended Repayment Plan

There is also the option of an extended repayment plan. It is the same as standard repayment plan except it stretches the repayment period to a maximum of 30 years. The length of repayment is dependent on the total amount borrowed.

You should note that you may end up paying more by opting for an extended repayment plan because of the fixed interest rate. On the other hand, the monthly payments would be easier to handle so you will have to decide how much you can afford to pay each month.Tip! Help Relieve Stress. With a student loan consolidation, you don’t have to worry about several monthly loan payments and due dates.

3. Graduated Repayment Plan

The Graduated Repayment Plan has a maximum repayment period of 30 years which is the same as the extended repayment plan. However, a number of your monthly payments will increase every two years.

4. Income Repayment Plan

For income repayment plan, the monthly payment is not fixed. Rather it is determined by several factors such as your total student loan amount, the size of your family and your income level. The maximum repayment period is 25 years.Tip! New Interest Rates. With a new student loan consolidation, you may be able to get a much better interest rate.

So how do you decide which education loan debt consolidation is suitable for you? Here are a few tips. If you are close to repaying your student loans, then there is no need to get a student loan debt consolidation unless you foresee some cash-flow problems in the coming months. Consider your financial status now and in the coming months or years. Are you able to comfortably pay the loan? Getting a new student loan debt consolidation is also a good way to improve your credit score since you have effectively cleared your old student loans and getting a new one.Tip! Lower Interest Rate. Student loan consolidation can save you thousands of dollars.

Biphoo

4 Oct 2017

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