|
Student loan consolidations can be an excellent way for students to
make their loan repayment more convenient and affordable. Before making
that decision, however, students need to have some basic facts about
when to consolidate and what alternatives are available.
Student Loan
Consolidations: When to Consolidate
Most student
loan consolidation efforts take place within the six-month grace
period after graduation. The reason is that the federal consolidation
program does not allow students to consolidate
loans while they are still in school and because interest rates
are lower on the student loans during this period.
Students are not required to consolidate only during that period
though. In fact, students can consolidate any time after graduation.
They should pay attention to current interest rates though. Unlike
student loans which have variable interest rates, the consolidated
loan will have a fixed rate so students want to wait until interest
rates are low in order to keep their costs down.
Student
Loan Consolidations: Alternatives
While student loan consolidations do have many benefits, some students
may not want to take the risk of paying a higher interest rate or
extending their repayment period. In these cases, students may want
to investigate other alternatives.
Student loan lenders offer
a number of payment options, including some with low fixed minimum
payments, so students can afford to make their monthly payments. Deferments
and forbearances are also available to students in many cases, including
financial hardship situations. Consolidated student loans also include
many of these same options.
Another possibility is loan serialization. A lender purchases a student's
loans from other lenders, then allows the student to pay the loans
back one at a time. Unlike consolidation, these loans remain separate.
The payments are usually lower, but the repayment period may be longer.
However, the interest rates continue to be variable.
Finally, students may want
to look into loan-forgiveness programs. These programs will pay or
erase part of a student's loan debt in exchange for certain types
of work. For example, teachers who work for five years in specific
low-income areas can have up to $5000 of their student loan debt repaid.
Other programs are also available.
|
