For hundreds of thousands of American college students, Federal student loans are an important link ensuring that they receive a fair and affordable education. With the price of a four-year degree about to hit an all-time high, undergraduate college students have moved from simply benefiting from just benefiting from loan programs, to having them be an understandable necessity of college life.
It’s a financial problem that’s unlikely to disappear soon, with colleges rapidly increasing their fees and thousands of students happily investing in a degree at its higher price point. It’s a decision that’s often unquestioned, particularly in value terms. Is a college education really worth the huge level of investment that’s now required? For hundreds of thousands of students, it appears that it certainly is.
Over the last five years, the average student debt following graduation has sat at around $24,000. It isn’t a low figure, particularly when the troubled job market is considered. Average salaries for most recent graduates hover at the $29,000 mark. This, combined with a rising cost of living, has made it particularly difficult for many new graduates to repay their loans according to their guidelines.
The end result of this is missed payments, defaults, and an alarming level of loans that are unlikely to ever be repaid due to the immense financial burden that they’ve become. With more students than ever before struggling to find any form of employment, tens of thousands of loans that were once an affordable investment in the future are now the exact opposite – a tough, future-killing burden.
Thankfully, there are a variety of solutions available for those that feel as if they’re neck-deep in student loan debt. By consolidating your federal student loans into a single, larger, and long-term repayment program, you’ll be able to save great deals of money over the long term. In fact, it’s a strategy that’s quickly winning popularity amongst hundreds of thousands of US-based students.
Before we look into student loan consolidation as a debt minimization and management strategy, let’s look at the requirements for it to truly work in your favor. For the most part, college debt can be divided into two different forms. The first is public student debt – federal funding – while the second is private student debt, a remarkably different form of debt in the eyes of the law.
Private student debt is acquired from banks, credit unions, and lending agencies. It’s able to be consolidated, albeit now with federal student debts. The two forms of debt are very different as entities, and as such need to be managed separately. Thus, if you have a mixture of private and federal student debt, you’ll need to consolidate the two debt categories using different loans.
If you would like to consolidate your federal student loans, you can look forward to a number of key benefits. These include the ability to make one payment, which goes towards one loan, a nice alternative to repaying ten, or even fifteen loans individually. This can reduce the amount of time required to complete your loan repayments, as it minimizes red tape and overall loan management.
Then there’s the lowered interest rates applied to many federal student debt consolidation loans. A standard student loan may have a relatively high rate of interest, albeit one that falls below most of the consumer or personal loans. As such, by using a longer-term consolidation loan, you’re able to lower this long-term interest rate to a level that’s more manageable for yourself and your career.
Thirdly, there’s the cash flow benefit that becomes apparent when a federal student consolidation loan is used. Making repayments on college debt, particularly several large college loans at once, can become an expensive exercise that limits your personal cash flow. By attending to a big loan with lower monthly payments, you can free up short-term cash flow to improve your condition.
There are some small hiccups to this process. Recent legislation from the government concerning the interest rates applied to student loans has made it difficult to save significant amounts on loans issued in recent years. It’s also difficult to combine federal loans and Stafford loans, as the two are considered to be different forms of debt by the majority of loan consolidation service businesses.
Finally, in cases where your debt is a combination of private and public loans, consolidation can be a significantly more time-consuming and difficult process to complete. In many cases, you’ll need to take out two loans to cover your other expenses, doubling the amount of payments that you’ll make every month. For some, this is a ‘convenience’ that creates more work than it eliminates.
However, the key advantages of student debt consolidation often swing the pendulum in its favor, making it a sensible and simple choice for graduates and professionals alike. Available using most leading credit unions and banks, it’s a simple process to apply for and achieve. In many cases, you could consolidate all of your loans within a single week, quickly cutting down your finances.
A useful service for students and recent graduates, consolidating your federal student loans is a smart move that has numerous personal rewards. As with any long-term financial decision, it is worth taking seriously. Think it over, and if it produces a noticeable improvement in the quantity, size, and scale of your loan repayments, speak with a representative as soon as possible.