Finance Debt

About Student Loan Debt Consolidation

Published at 03/21/2012 08:59:37


After four or so years of being in college, the day of reckoning comes when you have to pay your student loan. The reality is that times are tough and the current economic crisis does not help your situation. To make through school you may have had to apply for several loans. Making payments on all these loans is enough to put you under great pressure and drain you financially. However, there is still a way out of this situation. Student loan debt consolidation maybe your only window of opportunity. How does it work? What happens is that all the student loans are merged into one payment which makes it affordable. Student loan debt consolidation services are offered by banks, financial lenders and even government agencies. Whenever you approach a financial institution to have your loans consolidated, they will embark on paying your previous lenders the outstanding amount. From here, the lender will come up with a flexible payment plan where you will be required to pay a specified amount of money every monthly.


The lender will also come up with a new rate of interest. This is one of the crucial factors that you should consider when applying for a student loan debt consolidation. Some providers charge interests while other don’t. There are providers who charge a fixed rate while others will offer you a variable rate. At this point, it is essential for you to do some calculations and assess which is cheaper for you. The good thing with a student loan debt consolidation is that you get to choose the time frame of the loan. The four choices you have are:
• Income repayment
• Graduated repayment
• Extended repayment
• Standard repayment


The income repayment plan takes into consideration various factors such as: monthly income, total outstanding payment and family size. The repayment period can be stretched to about 25 years. With the extended plan, the lenders can allow you to keep making payments up to thirty years. This buys you a lot of time but it may be expensive in the long run. The graduated plan can also stretch up to thirty years; however, payments may be increased after every two years. The standard repayment gives students a maximum of 10 years to settle their loan. A fixed rate of interest is charged in this plan. Take a careful look at this four payment plans and pick one that best suits your budget.

Tips and comments

The choice of lender is very important. It is advisable to look at the following aspects when selecting a student loan debt consolidation.
• The loan provider should not charge an upfront fee.
• There are no hidden costs and charges
• Check that the lender is a reputable firm which has been in this business for a reasonable period of time.
• Ensure that you read the contract and understand their terms before signing any document.
• Check to ensure that the lender has accreditation from the Association of Independent Consumer Credit Counseling Agency.


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