Student loans have, over the years, enabled Americans with average financial means to get through college and all the accompanying expenses to be able to obtain a college degree. The truth is, most students and their families cannot afford to pay for college expenses without financial assistance, and typically, a student would have acquired one or more federal and/or private loans by the time he or she graduates. In fact, according to latest statistics, a whopping two-thirds or 65.6% of all four-year undergraduate students graduated with an average debt of $23,186 in federal or private loans for each student. In addition, the average cumulative debt increased by 5.6% or $1,139 a year since 2004. This explains the prevalence of student loans.
Unfortunately, most who availed of such loans find it difficult to repay the debts after graduation. For this reason, many have considered student loan consolidation as a logical alternative that will allow them to repay their debts long after they have graduated. In fact, because of the advantages involved, availing of a debt consolidation loan is the only viable option that others could ever have.
Consolidating all existing debts into one is quite an advantageous option as long as one knows what he or she is signing up for. Although it is relatively easy to avail of a loan consolidation package, one must read the fine print and all other details before signing up. Here are some useful tips to get the best debt consolidation package.
First, one must know that federal loans cannot be combined with private loans. There are separate rules governing the issuance and repayment of federal loans, so this must be made distinct beforehand. If one has anywhere from 5-6 private loans along with a federal loan, then one really is a viable candidate for student loan consolidation, wherein all the private loans need to be combined in order to minimize interest payments and simplify the repayment process.
The second important consideration one has to make is that availing of a debt consolidation loan will not magically erase all your existing loans but only expand the loan term in order to lower monthly amortizations and interest rates by as much as 34%. However, it must be made known that expanding a 5-year loan term to 10 years, for example, could result in the debtor paying double the interest because of the extended loan term. Thus, if one plans to take out such a loan package, check if the interest rates offered by the agency or company fall within reasonable rates.
Furthermore, before taking the student loan consolidation option, one must check for origination fees, prepayment penalties, and the maximum interest rate. Have a friend or a relative read through the fine print before you make the decision.
Finally, look for a company or agency that provides sound financial management advice that is tailor-made to your situation. The company must not only help the debtors overcome their debts, it must also help these debtors understand the repayment scheme.