Direct
student loan consolidation
Student
loans are two-edged swords. Without them, you couldn’t pay for that degree you
worked so hard for. On the other hand, without them, you might actually get to
keep the amount you pay out every month for yourself. You might get to pay your
other bills on time, afford a more reliable car, or find a better place to
live.
If
repaying your student loans is challenging your budget, or worse, putting your
finances – and credit rating – in the red, you might want to think about a direct student loan consolidation.
With
a direct student loan consolidation,
you exchange your outstanding student loans with their higher interest rates
for one loan with a more manageable, fixed interest rate.
A
direct student loan consolidation
may be the answer to more than one problem. If you have struggled to meet your
monthly payments and in fact have used every option for deferment or
forbearance your current loans offer, or find yourself about to default on your
loan, a direct student loan
consolidation can mean a fresh start. A new loan is often a clean
slate.
Not
only do deferment and forbearance options become available in case of need
again, but often direct student loan
consolidation gives you a much lower interest rate – as much as 0.6
percentage points – thereby lowering your monthly payments. And when you
consolidate those student loans under a new loan, those loans show up on your
credit report as paid off, and your credit score benefits.
There
are four plans for repaying a direct
student loan consolidation that you many want to investigate as you
consider which is best for your needs.
The
first plan is a Standard Repayment Plan and gives you a fixed monthly payment
for up to 10 years. The Extended Repayment Plan also sets fixed monthly
payments, but the repayment period is set between 12 and 30 years, according to
the total amount you borrow. In this plan your payments are lower because they
are spread across a long period of time. Keep in mind, however, that making
payments over longer periods of time means you will end up paying out a larger
total amount.
The
third option is the Graduated Repayment Plan. This is another direct student loan consolidation plan
with a repayment period between 12 and 30 years, only in this plan the amount
of your monthly payment will increase every two years.
Finally, if you have a job and family, the Income Contingent Repayment Plan may be what you’re looking for. This plan sets a monthly payment based on your annual gross income, family size, and total direct student loan debt, and spreads those payments over a period of 25 years.
While
direct student loan consolidation
may be the best way to get on top of student loans for some, if you are close
to paying off your existing loans, it may not be worth it in the long run to
consolidate or extend your payments.
However,
if you are still seeing loan payments coming out of your pocket well into the
future, consider the direct student loan
consolidation seriously. If you consolidate your loans while you are still
in school, you may qualify for a 6-month grace period before repayment begins.
You may find you will be able to keep any subsidies on your old loans.
Lower
your monthly payments, improve your credit rating, gain control of your loans,
and give yourself peace of mind about the future with a direct student loan consolidation.