Managing Student Loans

As college days draw to a close it becomes time to pay special attention to the student loans you took out, and which now need repaying. Most probably you will have amassed quite a few of them, dispersed between federal student loans and private student loans. As you look at the different dates on them and the different amounts it would be logical to combine these loans into one regular payment, for ease of handling and tracking. It makes sense to know exactly what is going out each month in payments, and to see one combined figure to be dealt with.

If your loans are split between federal and private you could well be looking at two separate consolidation loans, thus two monthly payments. It is more imperative that the private loans are considered in depth as you may be able to get a much better deal with a lower interest rate, thus reducing your total outstanding debt. This will make little difference with the federal loans. After July 2006 all new federal student loans were given with a fixed rate which will not rise above a certain level for the duration of the loan.

Unless you really need the benefit of having all the federal loans amalgamated and one monthly payment, it may be better to defer your options until later, as you may only consolidate federal loans once during their lifetime, unless you add another federal loan to an already consolidated loan. If you absolutely have a problem with the total monthly repayment on federal student loans, you should look to consolidate immediately to extend the term of the loan beyond its original ten years. By doing this you are increasing the total amount to be repaid, but could do it with the intent of prepaying the debt more quickly once you have a higher steady income.

It is definitely worth shopping around to look at consolidated loan rates on private student loans, as these were probably issued on a variable interest rate. If you have the chance to find a fixed interest rate for a consolidated loan you would always know what level of repayment you face on a monthly basis. Variable rates vary, and can turn a loan from affordable to difficult with great ease. Fixed rates are always better for the certainty and peace of mind they offer.

It could well be that during college you were able to establish a sound credit history which could now work in your favour in obtaining a reduced interest rate, as when the private loans were initially granted you were something of an unknown quantity and risk. The process of consolidating private loans is subject to credit checks and possibly a co-signer may be needed.

As with consolidating federal loans the private consolidation process allows you to extend the length of repayments, but again this does cost more in the long run. Some of the conditions which are not applicable to federal consolidation apply to private consolidation, so be certain to acquaint yourself with all the clauses. You do not want to be held responsible for any prepayment penalties at all, or fees.

Consolidating private student loans does have many benefits if it can save you money on the total repayment. Check lending institutions carefully to see where the best deals are to be located, and be sure that if you do extend the total term it is for the right reasons. Never do it just to reduce a monthly payment when it is not necessary to reduce it, as the initial saving you make will cost far more in the long run. No one really wants to still be hampered with student debt long term.