It’s a remarkably familiar situation for thousands of students. In their years of higher education, debt is something that’s rarely considered. They sign the forms, tick the boxes, and collect their loans at a frantic pace, ignoring the fact that every dollar they borrow now is a significant amount that’s due to be repaid in the future, often with a hefty amount of interest added in for good measure.
For millions of students, both United States-based and internationally, student loans are rarely even thought of as loans. They’re considered free money, fairly often, and treated as such, with thousands of students using them not for books or learning materials, but for lifestyle expenses. Under the idea that student loans needn’t be thought of as debt, they spend wildly, ignoring the long-term effects.
However, once their university years are over, thousands of students are forced to come to terms with the fact that they have tens, often hundreds of thousands of dollars in debt. It’s quite literally mountainous, with the average student having to repay their debt for decades before it’s entirely wiped from their record. All this in one of history’s worst job markets – it’s a nasty time indeed.
Due to the immense cost of repaying student debt, many students are looking into alternative ways to manage and repay their loans. Because of the availability of loans in college – public loans, and even private loans are all available – many students have college-related debt from multiple points and sources, including public government loans, private bank loans, and even personal loans.
These all combine into a difficult financial proposition for many students – combined payments to be made every month, often reaching into the thousands of dollars. For graduate students, it’s even worse. Debt for specialist degrees and graduate programs, particularly those at top universities, can reach into the hundreds of thousands of dollars, severely limiting students’ career choices.
Thankfully, there’s an alternative solution that really works – one that allows students to manage and repay their debts without the stress of constantly juggling multiple loans. By refinancing and managing your student loans, you can keep them under control while strategically repaying them over the long term. This improves both your short-term cash flow and your long-term savings.
First, let’s look at one of the most popular and easily accessible refinancing options, known as debt consolidation. Debt consolidation is frequently used by people with multiple sources of credit card or personal debt. These can include personal loans, credit or charge cards, and even bank account overdrafts. By consolidating their loans into one larger loan, they can more easily manage the debt.
Student loan debt consolidation works using the same principle – multiple loans, typically private student loans, are consolidated into a larger single loan with a long repayment period. This allows graduates to repay their student loans quickly, while paying off a larger loan over the long term at lower interest rates. Popular and easy to access, loan consolidation is a simple option.
However, it does have its downsides. Many students have a mix of private and government-based student debt, mostly stemming from public loans and private loans for tuition and expenses. Most consolidation loans will only allow students to consolidate a single type of debt. For example, one student may have multiple private and public loans, while only one type is able to be consolidated.
This is a potential issue for many students, as taking out two separate consolidation loans for the various types of debt defeats the purpose of consolidation altogether. Another key concern is how long the repayment period of your consolidation loan is. Many consolidation loans seem short in their early stages, yet become extended due to repayment periods and deceptive marketing.
Also, students consolidating Federal loans may miss out on the lowered interest rates that are often touted as a benefit of student debt consolidation. Due to new regulations requiring that all Federal loans are issued at fixed rates, consolidation eliminates the lowering of variable rates. This makes the majority of consolidation services unsuitable for students with large amounts of public debt.
There are alternatives, however, and many of them are financially advantageous to students. By refinancing your current loan, often with your private student loan provider, you may be able to secure better long-term rates than you would otherwise. If you have several large loans, many of your lenders may offer long-term repayment plans designed to benefit students and graduates.
There’s also the option of repaying your student loans at the minimum repayment level, as the rates of interest applied to student loans tend to be lower than those of other debts. This means that you’re going to be paying relatively less for your debts than you would other consumer debt, making it an easier option to repay other debts, such as credit card debts, before increasing your loan repayments.
While student loans can seem like a financial liability, a major annoyance, or a troublesome burden, they’re a reality for a reason. Your degree cost money, but it’s prepared you for a future that’s loaded with higher salaries and greater working conditions. It may take a while to see the benefits of your college education, but when you quickly move up the job ladder, you’ll know it’s really working.