Understanding Student Debt Consolidation
The majority of college students all over the world face difficulties when it comes to paying their tuition fees, especially now that the tuition rates have been dramatically increasing every single academic year.
This situation has led to many students opting for loans in order to complete their education without forcing them to drop out early before graduating. When such students complete their education, they should be prepared to face the world and take on the profession they were educated to work in.
But the first thing graduates become frustrated about is the problem of paying back all the debts that have accumulated in large amounts from the loans they needed to obtain their education.
If you are a graduate undergoing struggles trying to settle all the debts, you may want to consider student debt consolidation.
Student Debt Consolidation Explained
Student debt consolidation can be referred to as a process where an individual can take out a new loan in order to start paying off the outstanding balance of the existing student loans.
There are various debt consolidators offering reduced monthly payments as well as low interest rates to help make the pay back process easier. This will actually make it much better for you to be able to pay off all your existing debts over a relatively longer period however in payments that can fit your budget as you go.
How Does Student Debt Consolidation Work?
When it comes to consolidating your student loans, many consolidators will only accept your request if your total due balance amounts to at least $10,000.
However, the procedure works in a different way for federal student loans and private student loans.
Federal Student Loans
These types of student loans are financial aid offered only to students who are eligible for the federal loans and are usually based on general financial needs and income. Currently, you can find three types of these loans: Stafford, PLUS and Perkins loans.
Federal student loans have lower interest rates compared to private student loans. The grace repayment period for these loans is usually six-months following graduation.
Private Student Loans
These are student loans offered by private organizations such as banks and other large financial institutions. Private student loans are usually based on your credit eligibility.
The interest rates are higher than federal student loans. The repayment process may vary from one financial institution to the other.
Private student loans consolidation is much like and similar to standard debt consolidation. You will have to go through credit check and a co-signer is needed in this case. The process is simple; if you have private student loans debts, you will need to approach a private refinancing institution and your loans will be combined into one new loan.
Your repayment plan will be re-arranged and you can benefit from a reduced interest rate.
If you are ready to plan for student debt consolidation, be sure that you do not consolidate federal student loans and private student loans together. Once you are approved you can begin to feel the financial burden of student loans has been made less upon you so that you can now make the repayment process within your means.