Student debt and college go hand and hand in today’s world. Being smart about how you pay off your student loans is very important in both the short and long-term. Student loan consolidation has proven to be one of the more popular and more effective ways of handling student loan debt after graduation. It can make your debt burden easier to manage and possibly more affordable.
When speaking of consolidating your student loans, there are key factors that will help make this decision.
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Timing and Tracking Payments
A lot of students suffer from student debt because they have borrowed from various lenders and are unable to keep track of the payment dates, or the payments are more than what they can handle. Subsequently, missing payments or skipping payments can result in defaulting on student loans. This is where consolidating the loans makes everything a little easier and more doable. When consolidating loans, a graduate goes from potentially paying multiple monthly payments to the different lenders, to making a single payment, once a month to one lender. Consolidation allows graduates to keep better track of their payments, potentially avoiding falling behind on loan repayments and ultimately, default.
Getting Out of Default
When going to school, it is very important to understand the terms of your loans as it varies from one lender to another. Each student has a specific payment plan that is established, and is unique to them. However, there are times when a graduate defaults on their student loans before they even make a dent in it. This could be due to many factors:
- Couldn’t afford payment plan
- Ran out of time to pay it off
- Missed Payments (intentionally or otherwise
Defaulting on student loans has an enormous impact on what you can borrow in the future, for school, for a house, or really any line of credit. Loan consolidation is one way to ensure that defaulting doesn’t happen. By consolidating, some graduates have the ability to go back to being “current” on the repayment plan, which opens windows of borrowing money for school or other needs.
Improving Credit Scores
One of the positives of acquiring student loans is that a graduate that has no credit can start building their credit score. However, missing payments or defaulting on loans can have a negative impact on your credit score and cause unseen financial troubles down the line. Since consolidating student loans can often result in decreased payment amounts through interest rates and terms, it can often be the deciding factor between default and not. Making steady payments and keeping your loans in good standing will do nothing but help your credit score in the future.
Student loans have become a growing necessity in our nation. Therefore, knowing your repayment options are extremely important. Be informed and draw out a plan to be one-step closer to being debt-free.