Making it through college is a tremendous accomplishment and you should be proud of yourself. While your degree makes you more valuable on the job market, your credit probably took a bit of a beating by way of student loans – am I right? Sure, without them many people wouldn’t have been able to afford college in the first place, but now that you’re out and on your own, what do you do about that mountain of debt? Fortunately, there are student loan consolidation programs to help you manage your debt without going broke in the process.
What does a student loan consolidation program do?
A student loan consolidation program consolidates or combines loan debts and allows the graduate to make one monthly payment. In most cases this can reduce your monthly expense by up to 50 percent. The amount of the total loans and specific consolidation program will dictate your precise savings.
In addition to the benefit of one payment, most loans qualify for lower interest rates and help improve your credit score since loans, once consolidated, reflect a paid in full status with credit reporting bureaus that are used determine approval for other types of loans and financing. This status increases your credit rating while you benefit from the lower payments.
Do defaulted student loans qualify for consolidation?
Some consolidation programs do not accept loans in default status. Other programs are designed to address default loans, associated interest rates and payment plans. These special programs may require participation in a credit counseling program designed to guide you towards making better financial decisions while rebuilding credit.
Most people don’t want to manage their money, but credit counseling may benefit you, especially when considering default loans that will be paid off. This will eliminate the hassle of harassing mail and phone calls from creditors while working with a consolidation counselor to turn your credit history into something positive.
Federal Student Loan Consolidations
Even student loans that were issued by the government (as opposed to a bank) are eligible for federally backed consolidation programs. Most government loans have a lower interest rates and are easier to obtain than conventional loans. That is good news all around.
Consolidating all of your student loans and combining them into one loan will usually qualify the loan for lower interest rates due to financing a larger amount of debt. It will take longer to pay it back, but the benefit is paying less money out of pocket every month. Fresh college graduates may not make big salaries right out of school, and spending money wisely while trying to get a foothold in the job market can make the transition easier and more affordable.