Managing Student Loans

College is said to be one of the most expensive means of achieving personal greatness. However, with the changing business environment and the attitude of business, having someone with a college degree is starting to become the norm. As the demand for these college educated employees rise, schools are becoming more and more crowded and tuition rates are jumping up along with it. With such a massive demand for a college education, schools are able to charge whatever they want in order to deliver that education to students. Because of this, students are accumulating incredible amounts of debt over their time in college. With an average year of college costing upwards of $20-$60,000 per year for the standard school, it’s no wonder by the time the average student graduates in 4 years, they are looking at a debt of close to $100,000.

The biggest problem with this debt though is not so much the debt itself, but the ability to keep track of it. When you go to school, you are generally going to receive multiple loans each semester. These are going to be either from the same lender or from different lenders. I for example have 4 students loans that I must sign for each and every semester and I go to school for both semesters as well as the summer session. This means that I’m signing for 12 loans per year. After 4 years of college for the average student, that means that they could potentially be signing upwards of 50 loan documents. What this means? You have nearly 50 bills each month that you have to keep track of just for student loans alone. That’s right, they don’t just combine them all for you, because each loan has a different set of terms and conditions attached to it, making it difficult to merge them all together without doing a completely different loan.

So, in comes the consolidation loan, the hero of college graduates. For those of you that have a massive number of loans, you are probably trying to think of a better method of staying on top of all of these different payments. The best method is to turn them into a single payment. While this isn’t possible in the current situation, it is possible if you were to take out a consolidation loan.

Generally, a consolidation loan is one that is giving to merge all of your loans into one bigger loan with generally the same interest rate or close to the same interest rate that you received with your current loans. The biggest advantage however is that you are able to make a single payment and pay for all of the loans at the same time. This of course can make your bill paying situation incredibly easy in comparison. Not to mention, you could find yourself with a substantially lower monthly payment than you had when you added up all of the other loans.

But, just because the consolidation loan sounds pretty, doesn’t really mean that it is. While it can make your life substantially easier, it is also much more difficult to pay off. The reasoning is because when you have so many smaller loans, you can throw a chunk of money at them and pay them off one by one, eliminating a huge chunk of interest and one more bill with each one that you pay off. When you are looking at a massive amount that you owe, most people will just pay the minimum and assume they will pay on it the rest of their life. In a sense, you become a slave to this debt and lose all hope of ever recovering from it. So most people find that it takes them pretty much the entire loan term in order to pay it off, costing them a considerable amount of money in interest in the process. But with smaller more manageable loans, you will be much more motivated to eliminate them one by one, until you no longer have any remaining. While you are doing the same thing, the reality is that for most people, it is easier to pay off smaller bits of loans than to try and chip away at something that seems impossible to eliminate.

Overall, the consolidation loan is a great deal for many people, especially those that have a hard time staying on top of their bills or staying organized. By lumping together these bills many graduates are able to significantly reduce their level of stress caused by the the number of debts that they have, while not realistically lower the total dollar amount. It is important for you to evaluate yourself and consider which option is best for you in the long run. If you know that you can make more than your minimum payment to try and chip away at your massive debt, consolidation is fine, but if you know you’d be better with smaller debts at a time, like myself, then consolidation while it sounds great, is going to cost you more in the long run.