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Archive for January 19th, 2012

After you have graduated and landed the perfect job, it is now time to think about student debt that you have incurred. If you are lucky, you don’t have any. Unfortunately, most students who have graduated, and many who have not, incurred some form of student debt.

Student loans can be very stressful. Many times, you are given a forbearance after you have graduated so that you have enough time to find a job and start paying back your obligations. Do not think you can skip out on paying your student aid loans either, they are exempt from any statute of limitations. You can search the internet to find horrible stories about people’s debt going from $10,000 ballooning to $50,000 or more simply because they failed to act responsibly and pay down there debt. There is no way to escape the debt, unless of course you kick the bucket, the your estate will be responsible for paying the past due amount plus penalties and interest that are due. Think you can bankrupt student loans? Think again, there is no way you can reasonably expect to get rid of them, unless of course you pay them in full. They will haunt you for the rest of your days until they are paid.

The choice to consolidate your loans depends your situation. Are you having problems keeping up with your bills as it is? Does your current loan have a fixed or variable interest rate? If you have a fixed interest rate you may have more to loose if you combine your loans. Having a variable interest rate, you will be dependent on the annual changes of the loan rates. Your payment could go up or down significantly if not careful. It may be possible for you to consolidate your loans and get a fixed interest rate that is not susceptible to such changes.

The biggest advantage of consolidating your student loans is simply making one payment and having one interest rate. This will make life a lot less complex than having multiple payments and varying interest rates. It also makes it much easier at tax time when you can deduct your student loan interest without having a myriad of paperwork to sort through from different lenders. In turn, you will have less stress from having to deal with more than one creditor. You can make one simple, on time payment. You won’t have to worry about getting many bills and phone calls from different creditors. This alone will give you peace of mind.

You will also have much more flexibility when you consolidate your loans. Most of the time lenders are more lenient when you have all your loans in one place. You have more payment options as well. Having one payment location and not having to keep up with different creditors will make it worth you time to consolidate.

There are a few disadvantages, however, when consolidating your student loans. Because you have consolidated and put all your loans in one place, chances are your payment will decrease. Because of the decrease in payment, the cost to carry the loan will increase. You will be paying off the loan a lot longer this way. One way to avoid this is to increase your monthly payment as you can afford it. Another downfall of consolidating student loans is their requirements are stiff. You will have to meet several conditions before you are consolidated successfully. None of your loans can be in default and all must be current. If they are in default or not current, you still have choices, but they are far and few between.

Finally, it is ultimately up to you whether you want to consolidate your loans or not. If your cash flow dictates you must do something, then you must do it. Keep in mind that you cannot escape your loans, they must be repaid with penalties and interest. So simply ignoring them is not an option.