As a first-year college student or a parent who wants to send their child to college, you can't help but wince when you have to buy textbooks that cost a thousand dollars or when you get a bill for tuition fees. The rising costs of college in the United States have made more people want to take out student loans. This has made more people need services that help them combine their student loans. Students who go to graduate school or study abroad have racked up huge debts, much more than what was considered normal a few years ago. Interest rates on student loans are lower than average, and the terms of how to pay them back are very flexible. This is because these loans are made especially for people who don't have jobs.
But even though the interest rates are low and the payment terms are easy, many students may find it hard to pay back these loans on time. Student Debt Consolidation programmes are made to help students manage their loans and keep them from falling behind on their payments.
There are companies that specialise in helping students deal with their debt problems.
Different kinds of loans
There are two types of student loans: federal and private. If you are a student who has taken out both types of loans, you are strongly advised not to combine them into one loan. The only loan that can be refinanced is the federal loan, because it is backed by the government. You should put all of the federal loans together and pay them off before moving on to the private loans. Most private loans aren't backed by anything, so they have a higher interest rate than federal loans.
How to decide what to combine
If you want to consolidate your student loans, you will have to meet some requirements. Before you can use a student debt consolidation service, you have to be out of school or college and in what is called the "grace period" of your loan, or you have to have already started paying back the loan. When you call a debt consolidation agency that works with students, you should first ask them to talk to your creditors.
The agency will talk to these creditors and try to get them to lower your monthly payment and interest rate. As with any other type of loan, how you pay back your student loan will affect your ability to get loans in the future. If your student loan payments are more than 85% of your total monthly income, it will hurt your chances of getting a loan in the future. This shows how important it is to pay back your student loan on time and how it will affect your decision to borrow money in the future. Some debt consolidation agencies can help you qualify for more debt-reduction programmes based on how they see your finances and how you plan to pay back your debts. These programmes help you in many ways, but the most important one is that they lower your interest rates. They also include money saved during the grace period, direct debit payments, and payments made on time.
Beware
It's important to point out that not all consolidation companies are honest. So, you should apply to the consolidation company, which is well-known and has credentials to back it up. If you don't follow this advice, your problems could get a lot worse, since working with illegal companies will lead to more debt.
