As many parents and students struggle to make payments on their student loans, many of them are realizing that this debt comes with some serious strings attached to it. With years of economic difficulty and increasing college tuition, what you tend to hear is that the default rate on federal student loans has risen and this comes as little surprise to many people. Nearly one in ten federal student-loan borrowers fail to make a payment on their loans. Less wonder why you find people seeking for ways to consolidate student loans.
What nearly all students and even quite a few parents do not realize when obtaining an education loan is simply how different an education loan is from other sorts of debt. For instance, a credit-card debt can be wiped out in bankruptcy. By foreclosure, mortgage loans can be dismissed. Nonetheless, for borrowers with crippling education loan debt, financial failure gives no such new beginning; the loan must still be paid off, and often with new collection costs tacked on, allowing it to be even far more expensive than as it were.
Aside from that, up to 25 per cent of a person's wages could be taken off up until the loan is paid back in full. With government financial loans, the govt . may keep the state and federal income tax refunds, intercept upcoming lottery winnings and hold back a part of your social security payments. As a matter of fact, defaulting college loans can be totally devastating to a family's financial situation and a sense of well-being. Hence the offer to consolidate student loans, although doesn't mean that consolidation of loans will be the ultimate saving grace, because whilst it can be favorable for a few people, depending on the situation, it will not be favorable for others.
Even though consolidating an education loan implies paying more than you'll want to pay for a loan as a result of having its lifespan stretched, here are some logic behind why you should still combine student loans. Before I proceed with that, here are some scenarios where consolidating student education loans make sense.
It is ok to consolidate student loans if,
- You want to combine your government loans to make only 1 monthly payment.
- You want to lock in a fixed interest rate on variable interest rate loans
- You need a way out of default.
- You have Federal Family Education Loans, or FFEL - that is federal loans from a bank or private lender, and you want those federal student loans to be eligible for Public Service Loan Forgiveness. Note that only Direct Loans are eligible.
Reason One
Consolidation will keep you default free - this should mean a whole lot to students who wants to avoid the frustration that paying student debts comes with. Defaulting payments can be very costly, it will affect you directly and even your co-signer, in case you have one. If you're in default on your student loans, you can't get new loans to go back to school, and you will face severe collection procedures, but consolidation can give you a fresh start. Student in default have the chance to consolidate defaulted student loans into a Direct Consolidation Loan and stop collections including garnishments and tax intercepts. However, bear in mind that if you are in default, your balance will go up after you consolidate, because collection fees will be added to the loan.
Regrettably, private loans are certainly not entitled for debt consolidation into a Direct Consolidation Loan, and for the love of all that's safe, beware of bringing together government loans in to a private consolidation loan. Federal loans have significant borrower protections that you lose if you opt to consolidate government loans with a private lender. You'll find a few other benefits that you will get if you consolidate student loans, nevertheless make sure you make strong enquires from your consolidator.
It has an influence on the credit score - generally, students usually have no income during the period that they are in school, what they often have is the credit card or other debts. This brings a bad credit score that keeps the interest rate high. When the consolidation is done, possibly when the student has graduated and possibly got work, it helps bring the credit score down and helps to reduce the interest rate. In addition, if the loans consolidation happens during a recession, it will further reduce the interests.
Reason Three
Reason 3
Unfortunately, private loans are not eligible for consolidation into a Direct Consolidation Loan, and for the love of all that is safe, beware of consolidating federal loans into a private consolidation loan. Federal loans have important borrower protections that you lose if you choose to consolidate federal loans with a private lender. There are a few other benefits that you will get if you consolidate student loans, but make sure you make deep enquires from your consolidator.
What nearly all students and even quite a few parents do not realize when obtaining an education loan is simply how different an education loan is from other sorts of debt. For instance, a credit-card debt can be wiped out in bankruptcy. By foreclosure, mortgage loans can be dismissed. Nonetheless, for borrowers with crippling education loan debt, financial failure gives no such new beginning; the loan must still be paid off, and often with new collection costs tacked on, allowing it to be even far more expensive than as it were.
Aside from that, up to 25 per cent of a person's wages could be taken off up until the loan is paid back in full. With government financial loans, the govt . may keep the state and federal income tax refunds, intercept upcoming lottery winnings and hold back a part of your social security payments. As a matter of fact, defaulting college loans can be totally devastating to a family's financial situation and a sense of well-being. Hence the offer to consolidate student loans, although doesn't mean that consolidation of loans will be the ultimate saving grace, because whilst it can be favorable for a few people, depending on the situation, it will not be favorable for others.
Even though consolidating an education loan implies paying more than you'll want to pay for a loan as a result of having its lifespan stretched, here are some logic behind why you should still combine student loans. Before I proceed with that, here are some scenarios where consolidating student education loans make sense.
It is ok to consolidate student loans if,
- You want to combine your government loans to make only 1 monthly payment.
- You want to lock in a fixed interest rate on variable interest rate loans
- You need a way out of default.
- You have Federal Family Education Loans, or FFEL - that is federal loans from a bank or private lender, and you want those federal student loans to be eligible for Public Service Loan Forgiveness. Note that only Direct Loans are eligible.
Reason One
Consolidation will keep you default free - this should mean a whole lot to students who wants to avoid the frustration that paying student debts comes with. Defaulting payments can be very costly, it will affect you directly and even your co-signer, in case you have one. If you're in default on your student loans, you can't get new loans to go back to school, and you will face severe collection procedures, but consolidation can give you a fresh start. Student in default have the chance to consolidate defaulted student loans into a Direct Consolidation Loan and stop collections including garnishments and tax intercepts. However, bear in mind that if you are in default, your balance will go up after you consolidate, because collection fees will be added to the loan.
Regrettably, private loans are certainly not entitled for debt consolidation into a Direct Consolidation Loan, and for the love of all that's safe, beware of bringing together government loans in to a private consolidation loan. Federal loans have significant borrower protections that you lose if you opt to consolidate government loans with a private lender. You'll find a few other benefits that you will get if you consolidate student loans, nevertheless make sure you make strong enquires from your consolidator.
It has an influence on the credit score - generally, students usually have no income during the period that they are in school, what they often have is the credit card or other debts. This brings a bad credit score that keeps the interest rate high. When the consolidation is done, possibly when the student has graduated and possibly got work, it helps bring the credit score down and helps to reduce the interest rate. In addition, if the loans consolidation happens during a recession, it will further reduce the interests.
Reason Three
Reason 3
Unfortunately, private loans are not eligible for consolidation into a Direct Consolidation Loan, and for the love of all that is safe, beware of consolidating federal loans into a private consolidation loan. Federal loans have important borrower protections that you lose if you choose to consolidate federal loans with a private lender. There are a few other benefits that you will get if you consolidate student loans, but make sure you make deep enquires from your consolidator.
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