Consolidating College Loans: The Effective Debt Management Option
The motivation behind consolidating college loans is to clear student debt in the most manageable way possible. After all, reducing the threat of missed payments and late fees is a key part of that plan.
It might seem that taking out a consolidation loan would only lead to a worsened situation but the truth is that it works. Growing debt is only part of the problem, with financial worries deeply affecting the grades of most students too. So, managing student debt is important for more than just financial reasons.
There are a lot of comparisons between regular loans and college loans, especially in terms of how a consolidation loan works. But there are some clear benefits that students can enjoy.
Lowering Debt Through Improved Terms
The whole idea of consolidation is that a loan is restructured in order to lessen the financial strain. When it comes to consolidating college loans, it is not just about how much the loans are for, but also the type of loans. And more specifically, how using a consolidation loan to buy them out affects the original advantages.
Simply put, if the loans involved are issued by private lenders then the advantages presented by consolidation are usually greater than if the loans were federal financial aid packages. In this case, the terms offered by the federal loans can be greater than those offered by any consolidation loan agreement. So, managing student debt may require greater considerations.
Nevertheless, the right consolidation agreement on college loans can prove to be highly advantageous. If the combined monthly repayments on existing loans are $900, for example, a new deal might cut those repayments to $450. So, pressure is lowered and extra funds are released for other expenses.
Debt Accumulators Cut
Students know all about struggling with debt, but much of the debt increase is caused by the late fees on missed payments. What consolidating college loans allows a student to do is to clear up the fees and secure a repayment schedule that makes missed repayments less likely.
Knowing that late fees are a key factor in the accumulation of debt creates a certain amount of fear. For example, if one repayment of just $200 is missed, then late fees might increase the repayment due to $225. So, when the payment date comes around again, the borrower must pay $425. By the third month, $650 is due. But by properly managing student debt this scenario can be avoided.
Of course, this example is only for one loan. If four or five loans exist, then the overall debt can become extremely high, very fast. The only logical thing to do in this situation is to consolidate the college loans, reduce the monthly loan repayments to one simple payment, and make late fees a thing of the past.
A Positive Move Forward
The psychological effect of struggling with debts can be negative on a student, contributing to an overall fear of failing both in passing exams and in getting a career. But by consolidating college loans, the weight of worry can be lifted and student confidence returns.
The fact is that with a consolidation program, managing student debt is well-structured, effective and positive. The complex web of loan repayments, interest rates and late fees, is replaced with a simple repayment schedule involving one payment.
And because the repayment terms is extended, perhaps to 10 years, the process of clearing debts is accomplished steadily. And paying off college loans is the whole point to the move anyway.
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ABOUT THE AUTHOR
Devora Witts is a certified loan consultant who helps people get approved for Loans for People with Bad Credit and Bad Credit Mortgage Loans. To get aid with your financial situation you can visit her at http://www.badcreditloanservices.com