Suffering From Debt Woes- Should You Consolidate Student Loans?

Loans rob your peace of mind and render you helpless if it spirals out of control. In the USA, several people have student loans, and they look for help in the above field. Educational debt is a woe that most graduates face in the USA. It is not uncommon for one to be completely overwhelmed by the presence of student loans. Several people leave school with a combination of federal and private loans. Each of them is different in amount, they each have different due dates, and it is hard to keep track of them. The woes of student debts are overwhelming and if you are not careful there is a possibility of you missing out on payments. It is here that debt consolidation of student loans helps you to eliminate the woes of debt and brings you peace of mind.

Direct consolidation loan- how does it work for your student loan?

If you are a student and have many federal student loans, you can opt for a direct consolidation loan. When you consolidate all your loans together, the government provides you with a new loan for the same amount of the old one. Here, instead of paying multiple loans, you can pay one single loan. The rates of interest on this loan is a fixed rate one, and it stays the same for the entire period of your loan. The interest is the average of all the interest rates of your past loans. With the help of this loan, you can reduce the stress of your debt while retaining the benefits of your federal loan. This loan can help you to qualify for other federal programs like income-driven repayment or IDR plans.

When should you consolidate your student loans?

Remember student loan consolidation is not ideal for everyone. However, it does have benefits more than just streamlining your loan payments. When you apply for a direct reconsolidation loan, you automatically are extending the repayment of your loan up to 30 years. This, in turn, reduces the amount of money you need to pay. Now, the question is when you should consolidate a student loan?

Experts say you should consolidate a student loan when-

  1. You wish to reduce payments every month- The moment you become a graduate, you become enrolled automatically in a standard payment plan that extends to 10 years. In case, you are unable to repay the loan; you may consider debt consolidation- this will extend the loan to 30 years and results in the reduction of payment. However, note when you opt for a direct consolidation loan you will be paying more interest over the next years. The benefit here is that you will have space to breathe in your budget and do not have to worry about financial crunches in the early stage of your career. Many students feel that they can get relief in the form of debt settlement, but this is not true. Debt settlement programs are ideal for credit card loans. For student loans, you should opt for debt consolidation. However, like everything else, individuals that have credit card loans that have spiraled out of control can opt for a debt relief program after they have carefully gone through debt settlement ratingsand reviews.
  • You are looking for a fixed interest rate-If you have federal student loans; you will find that some of them might have variable rates of interest. This means they are subject to change as per the conditions of the market. However, if you are looking for a fixed rate of interest, you may opt for debt consolidation that gives you one fixed rate for the whole duration of the loan. With the loan you effectively can alleviate stress and tensions- you do not have to worry about market conditions and fluctuating interest rates anymore.

Beware of scams

Experts in the field of debt consolidation say as a student you must beware of scams. Several fraudulent companies in the market promise to give you instant solutions. You should be aware and careful of these scams that are prevalent in the market today. Like for instance, some companies promise to consolidate your loan against a fee. However, you should note that debt consolidation is free and you do not have to pay for it. The approval process generally takes about 30 minutes if you apply for it online.

Student loan refinancing vs. debt consolidation

Several people use debt consolidation and refinancing in the same way. However, you should remember that refinancing a loan is very different from debt consolidation. In the latter, you are not able to save money. You should also note that if you have many private loans, you are not eligible for loan consolidation.

How does refinancing a student loan work?

Refinancing a loan works completely in a different way. Here, you need to approach a private lender who will work on the refinancing plan. This may be done for all or even some of the federal or private loans you have. When you refinance a loan, you get a new loan with fresh terms and conditions relating to rates of interest, payments each month, the period for repayment, etc. Like everything else, both consolidation and refinancing have their share of pros and cons. This is why when you wish to alleviate the tensions and the stress of student loans, make sure you are educated in both fields correctly so that you effectively can make the right choice without hassles at all.

Therefore, from the above, it is evident that you no longer have to suffer from the tensions and the woes of student loans as there is help in hand. When you are looking for help, ensure you consult qualified professionals in both fields so that you can compare both refinancing and debt consolidation of student loans to make the right choice for the alleviation of debts with success! There are several options available from which you can choose one for your loans.

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