Happy Friday everyone! I was doing a little internet surfing after I got off from work. I found this interesting infographic about the “Life” of debt. Enjoy!
If you are thinking about consolidating your private student loans, now is probably the best time. As interest rates have dropped, more than like you likely you will be able to lock in a better interest rate that can also help you to have lower monthly payments over a shorter term.
Reasons to consolidate your loans
Another good point to having your loans consolidated is it can help you so that you don’t have several different payments in different areas. This can take some of the pressure off of a student who is trying to stay on track and doesn’t want to go into default. You do have to keep in mind that your private student loans cannot be combined with public loans that you took out through the government. Because these loans are set at different types of interest rates, they cannot be combined into one monthly payment, but your private loans can all be combined into one single payment.
How do I start the student loan consolidation process?
The first step to consolidate your loans is to find out how many student loans you have. Surprisingly, a lot of students who take out loans and credit cards while they’re in college may not know exactly how much they owe and they may not even know how many loans they have because all they do is renew the loans while they are in school or just sign off on them. Usually in school you’re so happy to have your bill paid, you’re not paying attention to the rate, the amount or the term. Now is the time to get organized so that you can find out exactly how much you owe. A good place to start is with your credit score. You want to run your credit report to find out exactly how much student loan debt you have. Because your loans are taken out through the government for the ones that are public, and then you have your private loans, they will be all be listed on your credit report and you can quickly access them. In the event you don’t see a particular loan you took out, contact the company or the financial aid new company name.
Checking your credit report will give you:
- a detailed breakdown of the names of your lenders
- the amount that you owe
- and the actual terms of your loans
The next step is to contact a student loan consolidation company that can help you to organize your loans into one payment.
How do I find consolidation help?
When you go online, there are many different websites that can help you to set up a consolidation plan for your student loans. Keep in mind you may want to choose a company that will offer different alternatives at once. What that means is when you seek a company that can give you loan rates from different financial firms and banking institutions, this can help you to see everything at once so you’ll be able to make a decision as it relates to your particular circumstances.
Finding the consolidation plan that’s right for you
Consider this example: If you have $30,000 in student loans, Company A may offer a lower monthly payment, but it may be over a longer term like for 25 years. Company B may offer you a higher payment per month, but the term may only be 15 years, while Company C may give you a 15 year term and a variable rate that’s affordable. That’s why you want to compare rates and plans.
What are the requirements?
You will have to have a good credit history to get a better rate for your loan, but you may be able to find a company that offers a good rate even if you do have so-so credit. The best way to find out what you can apply for and what your rates may end up becoming will be when you check online. Try to get as many quotes as you can and target companies that can offer more than one quote at a time so you can see everything at once. This can give you the best alternatives and options for your particular situation.
For anyone who suffers under student loan debts or high monthly payments, you know that this process can be something that can eat up a large chunk of your income. If you’ve defaulted on your loans then you have to worry about having your wages garnished and you can see an additional loss in your income that can quickly spiral out of control. If you work in the military or in a public sector, there are options that you may not be aware of.
Because nurses are committed to giving care, there are programs that have been set up to help to ensure that any nurse who works in this particular area as it relates to dealing with the public, and working in clinics and hospitals to help the less fortunate is able to have their loan balances paid off, or forgiven in order to give additional support to these particular types of communities. Continue Reading
While a lot of students may not know it, the interest rate they have attached to their student loans can be higher or they can be lower depending on the type of loans you have taken out. Your interest rate is actually the fee that’s paid to your bank lender or financial institution in exchange for them allowing you to be able to borrow money from them for your loan.
How loan types affect interest rates
If for example you have a federal student loan that’s given to you through the government, your interest rate will be lower. The government wants to make sure that everyone has access to federal student loans. If on the other hand, you are taking out private loans, then more than likely your interest rate may be a lot higher, and this can actually go up to 17 to 19 percent depending on the financial institution you turn to for your private loan.
Also keep in mind as it relates to your private student loan, you’re going to need a credit check for this, and you may require a cosigner, so your parents may have to sign for this particular type of loan.
The benefits of a federal student loans
That’s why one of the easiest things to do if your parents can’t afford for you to go to college, is to take out a federal student loan which will ensure that you are able to go to school, and you don’t have to worry about high interest rates.
What are the interest rates?
Interest rates are divided into different types and categories. Interest rates, effective after July 1, 2014, are thereafter broken down as follows:
- Direct subsidized loans for undergraduate 4.66%
- Direct unsubsidized loans for undergraduate 4.66%
- Direct unsubsidized loans for graduates or professionals 6.21%
- and Direct PLUS loans for parents 7.21 percent
The actual interest itself is an expense and the fees that are charged are looked at as a set amount that’s going to be required to be paid in addition to the money that’s paid on the actual principle of the loan itself.
Reasons to refinance for a lower rate
That’s why when you’re ready to graduate from college you may want to consider refinancing or consolidating your loans to try to get a lower rate. More than likely, four years or possibly eight years may have gone by, but this period of time might be longer if you’re going to medical school, law school, or other professional areas.
You also want to be sure that when you graduate you check interest rates to determine the current rate. Because you can refinance and consolidate your loans, that means you may be able to get a lower rate and lower percentage. For example, if you decide to refinance your loans upon graduation, instead of having six or seven different loans, you can have one combined loan that gives you only one payment. There are plenty of student loan refinance lenders on the market. Even some here in Boston like Citizens Bank. But, you should shop around to get the lowest rates. Each student loan refinance lenders has different rates and even small savings can add up big over the long term.
One point to keep in mind as it relates to your loans and consolidating them or refinancing, is that your federal student loans cannot be combined with private loans because they fall into separate categories. That means that all of your federal student loans that you were given through the government such as Direct Subsidized, Direct Unsubsidized and Direct PLUS loans, can all be consolidated into one payment. Likewise, any private loans that you may have taken out can all be consolidated into one payment.
Get organized to get affordable rates
Ultimately, your goal is to try to ensure that when you get in school you only use money for school loan purposes and try to keep the amount of loans you take out down to a minimum. You have to keep in mind that as loan interest is calculated, it is based on the outstanding principal balance times the number of days since last payment, times the interest rate factor and that’s where the interest amount comes from.
Once you graduate, you can go online and utilize a loan calculator to help you to understand how much you owe in student loans so that way you can get ready to refinance and consolidate your loans to make an affordable payment.
For more information, be sure to contact your lender, your school, or the U.S. Department of Education.
If you are thinking about taking out loans for school, there a lot of things that you may want to consider as it relates to available types of loans when you apply. For example, a federal student loan is something that the government gives and this will come with a lower interest rate, while private student loans may come at a higher rate. There are a lot more advantages to taking out federal student loans including flexibility, no credit check, better financing, and the interest rate is more than likely going to be a lot lower.
Private student loans will come from a bank, they can come from a financial institution and you may need a cosigner in order to obtain these types of loans. Federal loans are the easiest option as it relates to different types of school loans that you can take out.
Different types of federal loans can include:
- Direct subsidized loans
- Direct unsubsidized
- Direct PLUS loans
- and even Federal Perkins Loans
Keep in mind you can apply for these loans for undergraduate course work and graduate school.
Benefits of federal student loans
As it relates to your federal loans, you don’t have to start paying for your federal loans until you graduate from school, leave college, drop out, or your enrollment status changes. More than likely this will end up being a six month term before you actually have to start paying the money back.
Sometimes students take a semester off and that’s fine, but keep in mind whether you are in undergrad or grad school that if you take longer than one semester off, your loans may become due. That may mean making a few phone calls to let your lender know that you are still enrolled and you may need to show proof.
Interest rates are also going to be different than it would for private student loans because with federal loans, your interest rate is at a set and fixed amount. You may also find that your loans are federal student loans will be based on your financial need and this is more than likely going to be the option that would be approved for you first.
No credit check with federal loans
That’s because there’s no credit check that would be required for this particular type of money for school. Its just based on you applying, full-time enrollment, and being a student. Given these easy terms, its clear to see this is an easier loan program as the money will be given to you for school based on need. As we previously mentioned, there is no cosigner or credit check that is needed in this regard.
Another point to keep in mind is that the interest may be tax deductible and you’ll know that at the end of the year on your taxes. You’ll actually see the statement from your school letting you know how much interest was applied to your student loans.
As it relates to repayment, your federal student loan payments can be consolidated. You also don’t have to worry about a prepayment penalty, and you can have your loans postponed temporarily if you have financial hardship issues.
For more information on federal student loans, contact the U.S. Department of Education.
Benefits of Private Student Loans
As it relates to private student loans, you will find that the requirements are a bit more stringent and not as flexible. For example, your private student loans are going to likely require a co-signer and good credit, because these are literally considered bank loan that you would take out. Your interest rate may be much higher and can be 17 to 19 percent. You may also find that these loans are not subsidized and you cannot combine them with your public federal student loans.
For these types of loans, as it relates to your co-signer and credit check, more than likely if you are a student, it may be your parents who would have to get the approval for these loans and it would be in their names. Keep in mind that if for any reason you try to do a loan forgiveness program, your private student loans may not be eligible if your parents signed for them. This would also relate to public federal loans that your parents may have signed for.
For more information on private student loans, make sure to contact your school, your lender, or a local bank.