Are you a college graduate having trouble repaying student loans, or a recent graduate who is not looking forward to the task of figuring out who gets paid when? Over the course of a four or five year college education, students and parents can take out a variety of federal and private student loans. When the bills start coming due, about six months after graduation, it can be overwhelming if you haven’t done a little advance planning.
If you just graduated and are worried about your upcoming loan payments, take some time now and do your research. Find out what loans you have, who your servicers are, and what your monthly payments will be. Try to determine now if you qualify for a deferment or forbearance, or some type of income-based repayment plan, so you can set those wheels in motion. Consolidation is just what it sounds like – you are consolidating many loans into one. In essence, you are refinancing all of your old loans and taking out one new one. It should be easier to plan for one monthly student loan payment. Here are some things to consider before you consolidate your student loans:
• Federal and Private: Generally, you want to take advantage of a Direct Consolidation Loan through FSA for your federal student loans so that the federal government remains as the backer of your loan. There is no application fee involved. Private loans cannot be included into this amount. If you are considering consolidating private student loans, be sure to carefully review all interest and payment information.
• It doesn’t reduce the amount of debt: Loan consolidation does not reduce your student loan debt; it simply makes it easier to manage. The total amount of money you end up repaying could in fact be more than what you would have paid had you stayed with your original repayment plan.
• Check your benefits: Although you may still have access to certain income-based repayment plans as well as the loan forgiveness for public service program, you might lose out on specific borrower benefits associated with your original loan. Check with your servicer to determine exactly what you receive through your current loan.
With the Early FAFSA coming up on October 1, securing financial aid has taken a starring role. College students during the academic year of 2017-18 will soon have numerous financial decisions to make of their own. As they look at the possibility of using student loans, they should also look down the road to determine how they will repay those loans.
Get more information on student loans in my book, Secrets of a Financial Aid Pro. It reviews the differences between federal and private student loans, discusses the entire financial aid process, talks about good money habits to instill in children as they are growing up, and educates readers on using debt wisely. Order it now, and start getting your student ready to apply to college and learn about student loans.