With employment opportunities for fresh graduates rapidly declining, many former students are in an all-out search for suitable and affordable debt management strategies. With many of the nation’s most qualified and well-trained students facing a poor job market with tens of thousands of dollars in total debt, the generation of opportunities may not have such a fruitful future after all.
It’s very much a temporary situation, however, and one that will be rectified as the economy grows and continues to improve. However, for the next few years, many of today’s graduates are facing a tough decision. Do they continue to learn at college, amassing a greater amount of debt and further limiting their future choices? Or do they put their head down, work hard, and wipe it all away?
The answer, for hundreds of thousands of the nation’s graduates, is neither. With few worthwhile job opportunities available and a laundry list of potential reasons to avoid returning to college, many of our graduates are instead opting to continue searching for work, managing their loan repayments at a lower level than expected and instead ‘bridging’ their loans using consolidation and other options.
It’s certainly not a bad decision – after all, with starting salaries for recent graduates hovering at low levels, some graduates expected to earn less than twenty-five thousand dollars annually – delaying a career can be a smart move. In order to do this successfully, many students are opting to use private student loan consolidation – a practice of taking out one large loan to cover multiple student loans.
It’s a financial strategy that’s been tried and tested, having formed the basis of numerous recovery and loan management strategies over the past few decades. Traditionally used to assist those with extensive credit card debt and low-level bank overdrafts, debt consolidation involves using a low-interest loan – inexpensive because of its large scale – to repay lots of high-interest smaller loans.
For students, it can be an effective way to repay private student loans over a longer period of time, allowing students to easily avoid the hefty penalties often applied to late repayments. As debt from college is one of the few debts not to be cleared during bankruptcy or other financial conditions, it’s also a proven way to eliminate lifelong debts – sums of owed money which can follow you for life.
A variety of companies offer private student loan consolidation services, most of which are aimed at students that are currently either partially employed or searching for work. Due to today’s employee market – one that isn’t particularly friendly to fresh graduates – it’s often their only option. If you’re a student aiming to relieve their debt burden, consolidation can be an effective way to carry it out.
However, it’s worth exploring other avenues before working directly with a private student loan consolidation company. Many of these companies partner with universities and other colleges to offer their services to students indirectly, in a familiar, trusting environment. As such, you might find better deals through your college that you would by working with a private financial firm.
It’s important to consider the overall interest rate that your loan will be subject to when taking out a consolidation loan. On occasion, due to poor financial pre-planning, a consolidation loan can leave you liable for more interest than before. Many colleges have a financial planner that students can meet with – if you’re uncertain of your consolidation options, this is generally a good idea.
Alternatively, you could opt to work with a private financial advisor, using their knowledge to find an ideal consolidation loan, or alternatively a different solution to private student loan consolidation entirely. While consolidation is a great option for many students, there are others out there, such as snowballing your debts gradually, or delaying repayments until you’ve found quality employment.
However, if you do end up using a private student loan consolidation service, there are numerous ways to lower your overall interest rate, fee structure, and APR. One of these is to allow the loan provider to withdraw payments directly from your account. When using many big lenders, Wells Fargo a classic example, you could save as much as 0.50 percent by automating loan repayments.
Other options include improving your credit history before applying for student debt consolidation loans. The vast majority of consolidation loans have variable APR, with the driving factor behind pricing being your own credit history. By improving your credit score, you can secure lower rates, and in turn limit the total amount of interest you’ll be required to pay on your consolidation loan.
Finally, consolidating your debts using the same private lender as you used for your student loans can also result in lower overall interest rates. Generally, lenders are interested in seeing their risks effectively minimized – it’s the nature of the risk-averse finance industry. Use the same lender and you’ll give them total transparency on your borrowing activity, improving your interest rates.
While debt consolidation does have its pitfalls, it’s a proven and successful strategy for reducing your overall debt level in the long term. With hundreds of thousands of student out of work, and therefore unable to repay their student loans in a stable and reliable way, it’s also a great way to smooth out your repayments, improving your future credit score and lifetime of credit access.