Is Consolidating a Private Student Loan a Good Option?

Consolidating a private student loan can be a good decision. This will give you more financial options every end of the month. And even if programs on loan consolidation are reflected in your credit report, it is still a better choice than not paying or missing a payment on your student loan. Just make sure that you carefully choose your student loan consolidation program because this is usually something that is rushed by many.

It is really tempting and easy to put off your payment on your student loans. Unlike home mortgages and vehicle loans in which there is a great chance for the property to be repossessed, this cannot happen with your college degree if you do not pay up. However, taking for granted your student loan payment can lead to bad credit and can have a negative mark on your college achievements if you obtain security clearance. Moreover, a default on your student loan can cause a pay cut and tax refund ineligibility later on.

Because of the negative effects of unpaid student loans, it is always best to consider ways to pay them such as a loan consolidation. When doing this, find the perfect agency to help you. Find out their requirements because some of them are very strict. They may use your GPA or payment history as a qualification for a consolidation. Ask as many questions as you can even for queries that you somehow know the answer to.

If you decide to consolidate, it is best to start as early as possible. If you can do it now, then that would be better. You can start the process online. Then, you can communicate with an agent and clarify some questions that you may have. The most important thing is you are able to lower your monthly payments when you consolidate. Usually, consolidating your loans will cut your payment by 50%.

Image by watchingfrogsboil via Flickr

It is essential that you thoroughly know what consolidation is all about before starting with it. You do not want to waste your time with a wrong consolidation that does not ease your financial burden at all. Find out about the percentage that will be paid to the loan. Know as much as you can. Consolidating your student loan may be what you really need.

Related articles

• Unpaid Student Loans Top $1 Trillion (jhaines6.wordpress.com)
• Student Loans: Bubble, Bubble, Toil & Trouble (skydancingblog.com)

The Continuous Increase in Student Loans

Americans are accumulating more debts for college payments. This is the case despite records showing that in the past three years, they have been cutting on other types of loans such as mortgages, credit cards and vehicle loans. Here is an overview of the current debt scenario nationwide.

For student loans, the total debt was at $550 billion by the end of quarter two of this year. This is an increase of 25% as it was only at $440 billion during the third quarter of 2008, the period when household debt was at its highest. These numbers were provided by New York’s Federal Reserve Bank. On the contrary, the overall household debt has reduced by around 9%. In the past, it was at $12.50 trillion and it is already down to only $11.42 trillion. This decline is partly caused by the tightening of lending standards and banks’ write-offs of delinquent loans. When student loans and household loans are compared, a steady growth is seen in the former than the latter.

The figures above imply that recession is fueling the debt that students make. This may be due to the fact that college enrollment increases whenever jobs are not available. Moreover, the number of needy students is also growing at this time, said Mark Kantrowitz, publisher of Finaid.org, a tracker of industry relating to student loans.

For instance, there are around 9 million students who obtained Pell Grants. These mainly goes to students with lower than $40,000 in household income. This number is a huge increase from the $6 million grants given during the school year of 2008 to 2009.

Kantrowitz said that there is a possibility that the Fed in New York lowered the growth figures of the total student loan debt. He added that the numbers exclude the important interest costs that accumulate while students are still in school.

There is also a growth in the debt per student ratio. In 2009, the average level of debt for each student is around $24,000, reports the Project on Student Debt. At this rate, almost 2/3 of students finish school with loans.

It’s great that you are looking for the best way to repay a student loan. That means that you are a responsible person and want to do the right thing! Let’s take a look at loan repayments when it comes to student loans.

Two Ways to Repay a Student Loan
Majority of Americans have been struggling to settle different types of loans and debts such as mortgage, home-equity, credit card and vehicle in the last few years. But, these are not the only loans that Americans are having problems with. According to the Federal Reserve Bank of New York, student loans are also significantly increasing. Moody’s Analytics support this information by saying that there is no improvement in the rates of delinquency of student loans and the future outlook for borrowers are troublesome. If you are one of the many individuals who are experiencing challenges in settling your student loan, do not be tempted to ignore them. Take note that not paying your loan will have a huge negative impact on your future paycheck, tax refund and credit rating. Here are two ways to repay your student loan.

Serve an organization that can help you settle your debt.
There are many organizations that you can work for to obtain loan forgiveness. These include the United States Military, AmeriCorps and Teach America. Also, full-time public sector workers such as police officers, public school teachers and public defenders are qualified to have their debt balances cancelled after making 120 payments on or beyond October 1, 2007.

Seek a leniency application
If you took a Federal Stafford loan, you are allowed to defer your repayment up to a maximum of three years under the condition that you are unemployed, you are going through difficult economic challenges or you pursued grad school. You can also request forbearance from your lender.
Aside from suspending your payment up to three years, you can also make small payments for your federal loans in the first couple of years of your payment period. Moreover, you can also ask for an extension of your repayment term. Another option is to qualify for a repayment plan that is based on your income. This plan lets you link your income and your payment.

Related articles

• Student Loan Options in a Tight Credit Market (education.com)
• A Quick Guide to Student Loans (askthemoneycoach.com)
• 7 surprising ways to minimize student debt (msnbc.msn.com)

Bills Pushed For Student Loans To Be Discharged

There is a renewed move being pushed in Congress by very influential bankruptcy lawyers’ groups allowing the student loans of college graduates to be discharged to bankruptcy.

The National Association of Consumer Bankruptcy Attorneys had in the past pushed this change on how the bankruptcy code deals with student loans. NACBA is just renewing its bid for revision on the code.

NACBA is calling for Congress to act on this change with urgency because in the latest report made by Forbes, the outstanding student loans in 2011 is now at $ 1 trillion which is much higher than credit card debt.

According to NACBA’s report dated Feb.7, they find no reason at all for private student loans to be dealt with in a different manner from how the other types of unsecured loans are treated. The Association further added that if private student loans are not allowed for discharged, this will only worsen the financial situation of the borrowers.
The borrowers will have to pay more because of the higher interest rates on their private student loans plus the fact that their options to repay their loans are limited.

According to Time, in 1976, the bankruptcy code was not so strict. In fact, during that period, college graduates were allowed to discharge their student loans to bankruptcy. But in 2006, all revisions being pushed were ended. At present all federal and private student loans could not be discharged to bankruptcy unless the students can really proved that they are in a great financial hardship.

Forbes reports that there are two bills which are already on their way to Congress. The first bill is pushed by The House’s Private Student Loan Bankruptcy Fairness Act and the second is the Senate’s Fairness for struggling Student’s Act. If these two bills are passed, private student loans will be allowed to be discharged, but the federal student loans have to remain and must be paid.