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Beating the Cost of College Debts

March 15th, 2008

Making it through college is a tremendous accomplishment and you should be proud of yourself. While your degree makes you more valuable on the job market, your credit probably took a bit of a beating by way of student loans - am I right? Sure, without them many people wouldn’t have been able to afford college in the first place, but now that you’re out and on your own, what do you do about that mountain of debt? Fortunately, there are student loan consolidation programs to help you manage your debt without going broke in the process.

How can you benefit from a student loan consolidation program?

A student loan consolidation program combines loan debts and allows the graduate to make one monthly payment instead of several separate payments. In most cases, this reduces monthly debt by up to 50 percent or more. The amount of the total loans and specific consolidation program will dictate your precise savings.

In addition to one payment, you may qualify for a lower interest rate, thereby, saving you even more! By consolidating your student loans, you improve your credit score because each of the individual loans included in the program will be reported to the credit bureaus as paid in full, leaving you with one loan on the report.

Do defaulted student loans qualify for consolidation?

Not all consolidation programs accept loans that are in default. There are other programs designed to address default loans and associated interest rates and payment plans. These programs may require participation in a credit counseling program designed to help you with making better financial decisions while rebuilding credit.

Most people don’t want to manage their money, but credit counseling may benefit you, especially when considering default loans that will be paid off. This will eliminate the hassle of harassing mail and phone calls from creditors while working with a consolidation counselor to turn your credit history into something positive.

Federal Student Loan Consolidations

Even student loans that were issued by the government (as opposed to a bank) are eligible for federally backed consolidation programs. Most government loans have a lower interest rates and are easier to obtain than conventional loans. That is good news all around.

Consolidating all of your student loans and combining them into one loan will usually qualify the loan for lower interest rates due to financing a larger amount of debt. The life of the loan may be extended (meaning that it will take longer to pay it back), but the benefit is paying less money out of pocket every month. New college graduates may not make the greatest salaries right out of school, and spending less money while trying to get a foothold in the job market can make the transition easier and more affordable.

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