The sheer weight of debt that can accompany graduates as they leave college can be debilitating. Indeed, the task of clearing the debt can be a major undertaking for those with no jobs or low salaries in their first jobs. To this end, college loan consolidation is viewed as the first positive step on the road to freeing themselves of this debt.
Regardless of whether or not a person has a job, managing high debt is a major task. For recent graduates with little or no income, it is even harder and the principal target is to lower the required monthly repayment sum as much as possible.
Of course, college loans need to be consolidated with caution. There is no point in rushing into a consolidation plan that only leads to further financial heartache down the line. Carefully calculating the best move is always the wisest thing to do.
The Strength of Consolidation
There can sometimes be some confusion over the true strength of college loan consolidation, but the mechanics of such a deal practically guarantees an easier route to clearing debt for all college graduates.
Consolidation basically means that all of the debts accrued over the course of being in college can be cleared with one loan, thereby bringing everything together under one manageable loan. Often, the combined debts can be more than $50,000, but by managing high debt in this way, the task is most definitely made easier.
The reason is that, in one fell swoop, the debt created by three or four college loans can be cleared completely. Because these individual loans have different terms and interest rates, their combined repayment requirements can be much higher than that of the new loan. Therefore, consolidation is more manageable.
Benefits for Post-Graduate Students
The type of college loan consolidation is influenced heavily by the status of a student and type of loans they might have taken out. For example, graduates can generally look forward to securing an income, and so the consolidation agreement that may suit them is less strictly controlled than those for students beginning post-graduate education.
Post-graduate students may have already accrued major debts over the course of their 4 or 5 years in college, but since they are continuing their education, they are still without an income. Simply put, managing high debt is much harder when in college. However, there are avenues open to doing so.
The catch is that the best way to consolidate or clear existing college loans vary according to whether the source of the loans are public or private lending sources.
Public Vs Private Lending
Most students seek public lending options to finance their education, with college fees often covered by the likes of the Stafford, Perkins, Federal FFELP, Federal Direct, and Parents PLUS loan programs. The terms of these loans are actually quite reasonable, making college loan consolidation almost unnecessary. These terms include low interest rates that are fixed, and a significant period of grace in beginning repayments.
However, private lenders offer less accommodating terms. The problem is that once graduation takes place, the interest rates kick in, making managing high debt though consolidation necessary. These debts can include loans from family or friends, as well as lending institutions, credit card companies, or the SallieMae program.
In the case of post graduates, it can be possible to restructure college loan debt through what is known as a Chapter 13 payment plan. However, this is widely considered to be a last resort, as educational debt is not usually accepted in bankruptcy cases.
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