It has become increasingly more expensive to finance a college education, pushing graduates deeper into debt.
Although the average graduate leaves school with $21,000 in debt, an increasing number of students leave school with more than $40,000 in loans, which they will have to struggle to repay for a decade or more.
Even if you don't finish college for any reason, you still have to pay off your student loans.
Assuming you have $21,000 in Stafford loans, you will pay around $241 a month to service your debt.
If this amount is over 10% of your monthly income, then you may have trouble meeting your monthly payments and may benefit from Federal student loan consolidation.
Federal student loan consolidation will combine Stafford loans, PLUS loans and Perkins loans into one fixed-rate loan that will help lower your monthly payments since you will be repaying it over a longer period of time (from ten to thirty years).
Using the above example, your monthly payments will go down to around $136 if your consolidation debt extends the repayment term to thirty years.
If you consolidate several types of loans, the consolidated debt will be divided into subsidized and unsubsidized loans; however you will still be making one monthly payment.
You can also lower your interest rate by 0.
6% by consolidating your loans during the grace period before you have to begin repayment.
Also note that Stafford and PLUS loans given before July 2006 have variable interest rates; consolidating will give you one fixed-rate loan.
On the other hand, with Federal student loan consolidation, you will end up spending more money to repay your debt.
For example, for a ten-year, $21,000 loan, you will pay some $8,000 in interest; when you extend the term of the loan to thirty years, the total interest paid will be around $28,000.
But you can address this concern by increasing your monthly payments, since there are no overpayment penalties for consolidation loans.
However, Federal student loan consolidation allows you a wide variety of repayment plans, including a graduated repayment plan that increases your monthly payments every two years, an income contingent plan that pegs monthly payments to factors such as annual income, family size and direct loan balance and an income-based repayment (IBR) plan for borrowers that are experiencing partial financial hardship.
If you qualify for an IBR plan, your payments may not be enough to repay the entire amount over the term of the loan; if this is the case, the remaining unpaid amount will be condoned.
However, if you opt for IBR you can no longer shift to other repayment plans other than standard repayments.
Although the average graduate leaves school with $21,000 in debt, an increasing number of students leave school with more than $40,000 in loans, which they will have to struggle to repay for a decade or more.
Even if you don't finish college for any reason, you still have to pay off your student loans.
Assuming you have $21,000 in Stafford loans, you will pay around $241 a month to service your debt.
If this amount is over 10% of your monthly income, then you may have trouble meeting your monthly payments and may benefit from Federal student loan consolidation.
Federal student loan consolidation will combine Stafford loans, PLUS loans and Perkins loans into one fixed-rate loan that will help lower your monthly payments since you will be repaying it over a longer period of time (from ten to thirty years).
Using the above example, your monthly payments will go down to around $136 if your consolidation debt extends the repayment term to thirty years.
If you consolidate several types of loans, the consolidated debt will be divided into subsidized and unsubsidized loans; however you will still be making one monthly payment.
You can also lower your interest rate by 0.
6% by consolidating your loans during the grace period before you have to begin repayment.
Also note that Stafford and PLUS loans given before July 2006 have variable interest rates; consolidating will give you one fixed-rate loan.
On the other hand, with Federal student loan consolidation, you will end up spending more money to repay your debt.
For example, for a ten-year, $21,000 loan, you will pay some $8,000 in interest; when you extend the term of the loan to thirty years, the total interest paid will be around $28,000.
But you can address this concern by increasing your monthly payments, since there are no overpayment penalties for consolidation loans.
However, Federal student loan consolidation allows you a wide variety of repayment plans, including a graduated repayment plan that increases your monthly payments every two years, an income contingent plan that pegs monthly payments to factors such as annual income, family size and direct loan balance and an income-based repayment (IBR) plan for borrowers that are experiencing partial financial hardship.
If you qualify for an IBR plan, your payments may not be enough to repay the entire amount over the term of the loan; if this is the case, the remaining unpaid amount will be condoned.
However, if you opt for IBR you can no longer shift to other repayment plans other than standard repayments.
SHARE
