Making it through college is a tremendous accomplishment that any student should be proud of. A degree may make you more valuable on the job market, but your credit probably took a bit of a beating as a result of student loans. Yet, without loans many people would not be able to afford college. Now, that you are out and on your own, what do you do about that mountain of debt? Student loan consolidation programs may help manage your debt with a more affordable payment plan.
What does a student loan consolidation program do?
Simply put, a student loan consolidation program helps you to consolidate or combine your debt so that you can make one payment every month. In most cases this can reduce your monthly expense by up to 50%, though the amount of your loan and the program you work with will dictate your precise savings.
In addition to one payment, you may qualify for a lower interest rate, thereby, saving you even more! By consolidating your student loans, you improve your credit score because each of the individual loans included in the program will be reported to the credit bureaus as paid in full, leaving you with one loan on the report.
Do defaulted student loans qualify for consolidation?
Some consolidation programs do not accept loans in default status. Other programs are designed to address default loans, associated interest rates and payment plans. These special programs may require participation in a credit counseling program designed to guide you towards making better financial decisions while rebuilding credit.
Money management is not something most people want to do, but credit counseling may benefit you, especially when considering defaulted loans that will be paid off. The hassle of harassing mail and phone calls from creditors will be eliminated. This will help you while working with a consolidation counselor to repair your credit history to a positive report.
Students Loans from the Government
Even student loans that were issued by the government (as opposed to a bank) are eligible for federally backed consolidation programs. You probably already know that most government loans have a lower interest rate and they are usually easier to get than conventional loans, so it’s good news all around.
By consolidating all of you student loans, you are lumping them together into one loan that will usually qualify for a lower rate of interest because of the higher loan amount. Though the life of the loan will probably be extended (meaning that it will take longer to pay it back), you will benefit from paying less money out of pocket every month. As we all know, new college graduates will not always make the greatest salaries right out of school, and spending less money while you’re trying to get a foothold in the job market is a good thing.
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