Save Money, Pay Less, Spend More on What
You Want? Sounds too good to be true,
doesn't it? Well, if you'll spend a few
minutes learning about student loan
consolidation, you'll soon be armed with
enough information to make some really good
decisions and help you achieve all of the
above, and more.
Student loans are
available to students (and parents) in need
of help with living costs while studying and
working on a degree program. For many
students, student loans are their largest
source of cash and income (in some cases,
their only source).
What often happens is students acquire
multiple student loans, then begin to have
cash flow problems, which leads to charges
on one or more credit cards. These credit
cards are typically issued with very high
interest rates, often 18% or higher. This is
a severely problematic financial trap, and a
very tough way to get started in life for a
young person who is still in school or just
about to graduate. Too many students leave
college with debt that weighs them down
heavily, burdening their lives with debt
that will haunt them for many years to come.
So, how does student loan consolidation
work anyway? Students accumulate multiple
loans from various lenders. This leads to
multiple significant payments each month,
arising from several loans with unfavorably
high interest rates and overhead.
Loan consolidation allows students to
combine multiple loans into a single
instrument, one loan from a single lender,
typically at a more favorable interest rate.
In effect, this is like refinancing a
mortgage or credit card or other debt
consolidation - multiple debts reduced to
one. The balances of the original loans are
paid off by the loan consolidation lender,
and voila' - a single, lower payment! The
results: lower monthly payments, less
overhead costs for the same borrowed money,
immediate cash flow to spend on more
important items today, and less financial
stress for the student (who is typically
already under enough stress dealing with
their degree program and other aspects of
school life).
A student should seriously evaluate
consolidating loans if the consolidated loan
would result in a lower interest rate than
the current student loans, and especially if
the student is struggling to make multiple
student loan repayments already.
Often times, the merged loan includes a
more flexible set of repayment options, plus
no charges, fees or prepayment penalties. In
some cases, there may even be no pesky
credit checks, loan collaterals or cosigners
to deal with, as lenders have streamlined
their processes in order to compete more
effectively.
Student loan consolidation can reduce
payments by up to 60 percent. Actual amount
saved will depend upon the existing loan
interest rates and the term of the original
loans. Typical student loans are for a 10
year term.
When consolidating student loans, it's
possible to refinance for up to 30 years
(like a home mortgage). It's important that
there be no prepayment penalties, since the
student will likely want to pay these loans
off much sooner, once their earning power
has dramatically improved after graduating
and they're progressing in a career which
pays relatively well.
Of course, the longer the loan period,
the higher the interest rate, lower the
initial payments, which frees up precious
cash flow when it's needed most - while the
student is in school.
So, if a student has multiple loans,
typically in excess of $7,500 total, there
are many benefits a student consolidation
loan. It's a great way to free up cash flow,
pay less each month, and save money while in
school.
Rick Braddy is an avid writer, Texas
Holdem poker player, professional software
developer and marketer. His
loan consolidation review website
provides students and parents with a wealth
of free information and independent point of
view on
student loan consolidation, intended to
help young people better finance and
complete their educations.
