Types of student loans and their consolidation options

There are many types of loans students can apply for, but the simplest categories are the two: federal student loans and private loans. All loans funded by federal government are administered through the US Department of Education‘s Federal Student Aid programs. These are one of the easiest loan types to get student loan consolidation services. These federal programs spend approximately 60 billion USD each year in the form of loans, work-study support and grants. Stafford loans are the best and most popular form of federal loans intended for students. However, there are numerous types of other federal payment plans also such as military / ROTC plans to pay for college.student-loan

Private student loans are managed by standard lending institutions. Citibank student loans and the Sallie Mae Signature student loans are the two most common ones in this category. These lenders actually offer unsecured (and in certain cases secured) loans to the students, and mostly include higher interest rates in their terms than other federal counterparts in the business.

You can combine both private and federal loans, along with scholarships, to support your education. But always remember never mix the two types together while consolidating student loans. It’s a rule that you should always give priority to your federal loans while consolidating then separately consolidate your private student loan debt. The main advantage you can get by consolidating your federal loans is: a lower interest rate, which changes each of 1st July; it increases the time for loan repayment to thirty years reducing the monthly burden as well as the number of lending institutions you pay each month.

About half percentage (50%) of recent college graduates obtained student loans, with an averagely borrowed amount of approximately 10,000 USD. Till now, student loan interest rates ranged between 6 to 8 percent. Interest rates have fallen very low. As of fall in 2018, Stafford loan interest rates moved between 3 to 4%.

The students currently having loans, either it’s a single loan or multiple loans, will find number of offers to reduce their existing payments and indebtedness. Since interest rates are down now, loans can be consolidated and in few instances refinanced. When you are thinking about refinancing or consolidation of your student loan, you should compare interest rates of both categories before consolidating federal student loans.

How debt influences students?
Same like all other debts, student loans will also have an impact upon your credit and future decisions. Student who borrowed a fairly large amount for college (exceeding 5000 USD) is less likely to further advance for higher education. Moreover, if your student loan debt exceeds 8% of your income it will be considered negatively at the time when your credit will be evaluated for further loans; this becomes particularly more effective in a case if you’ve one or more defaulted student loans.

Two best methods to relieve the debt pressure are:

1- Cut down or eliminate the principal balance.
There are certain types of specific loans often forgiven by service or the higher education. Therefore check out the specific student loan program you are having.

2- Cut down your monthly payment.
As debt burden is evaluated by comparing the loan payment to the income, it means that if you reduce your payment it will definitely help in your credit evaluation.… read