Student Debt Consolidation

Around the country, you can see many people who have student loan problems. Almost everybody suffers from hardships in paying their loans back and waiting for forgiveness programs and loan discharge. However, there is another way out. Student debt consolidation can help people as well. But in the short term. Whenever a student used debt consolidation opportunities, he or she accepts to pay more than the actual amount. At first glance, it seems that companies or government consolidation programs are beneficial. But taking every single entity into account, you see that you will be in debt in the long term.

They give you what you want. Make you satisfied. They ask more from you, by implementing interest rates. Even for the sake of humanity, or whatever, they offer the grace period. This period is usually six months after graduation. They help you to deal with small relatively less amount of money per month.

 

 

Even you can find programs that sometimes allow you not to pay at all. This makes consolidation attractive for most of us. But there is a reality that many people were drawn into debt mob with consolidation, just because not being careful during the documentation process. Paying less attention to regulations can cost you head, metaphorically. Usually, there are specific loan types that can be consolidated, and there are organizations called servicer. Servicer giver you money, but sign a contract with you and lender. The servicer might be a lender. But you can find the services whose primary function is to service rather than lending. Being a lender requires to have a significant money resource on your hand. Let’s talk about more specific factors on loan consolidation.

 

Overview

 

Education is essential to enhance your knowledge and improve yourselves so you can build a successful career. Unfortunately, it can be costly, too. If you are suffering to pay your student loan and you have debt imagine that there are more than forty million students who are facing the same kind of issues in their upper education life. Researches show that in The United States student loan debts is rising around three thousand US dollars every minute. College and University students are thinking of ways to study while paying that vast amount of bills and there are not many options in front of them. There are some programs such as student debt consolidation that helps those students to pay their debts and continue their studies.

 

General information

Student debt consolidation program is the loan program that helps students to get loans for their federal education expenses while combining them into one debt loan. In this program, interest rates are calculated accordingly to student’s previous loan rates. This means that, for instance, you are working in a somehow high salary part-time job and getting and getting the extra money that helps you to pay your debt.

Whenever your income decreases the timetable for paying back the consolidation is also increasing, which will mean that your interest rate over time is also growing. But if you want to save money while studying and paying your student loans, this student program may not be the best option because the interest rate is always getting higher over time and never goes down.

How to get verification?

 

   Before the process starts student should qualify the fact that those student loan debts are not private and all of them are federal, which is the first step while acquiring student debt consolidation. Every student wants to get a loan that allows them enough time to pay back the debt, and in smaller portions and for that it is better to find a right consolidation specialist that can help you with that issue and answer your question regarding this matter. What if you have private student debts, what happened then, and how to qualify for this student consolidation program? In that case, you need to have a good score and academic standing, balanced ratio of your debt to income and the proof that shows your daily income.

 

Which program to choose?

 

After deciding to get a student consolidation debt program, you need to look for the best available options in the market. There are plenty of companies that are offering that program, and you should choose the one that fittest you the best. To identify the best consolidation program for you, you should evaluate them through some criteria such as First of and most important aspect while defining best consolidation program for the student is the interest rate that offered by the company. You should know beforehand that interest rates are fixed or they are variable.

Pay attention to it because it can help you later while paying off your loans. Secondly, you need to know the postpone options or if there are any. Skipping options is also an essential factor because once you need to decide to defer your program for an unfortunate personal reason, it is better to have a choice; otherwise, it will create another problem for the student. Thirdly, you need to check the reviews prior to that time about the program. Student reviews may help you to define the best available option because it comes from your peers. Finally, you need to look up to the differences between student debt consolidation programs and what are the advantageous sides in one that is not applied to the other.

What things to take into account during consolidation?

 

Like everything else in life, loan consolidation has its pros and cons. However, it is essential to understand the overall process and to agree on the regulation that will bring you money or at least time. The student can obtain a loan from two different resources, government and private company. Government loans, so-called federal loans are more reliable for people. Because in this type of loan you have still a chance of loan forgiveness or loan discharge or at least payment reduction chances. For example, if you are a citizen of the US, it means you are paying taxes.

 

There were millions of billboards on the road to encourage you to pay your taxes in time. So those taxes can be considered as your payment to the state and might help you to reduce monthly payment or so. But the case is not the same for private companies. If you think that all companies want to benefit from every single of its customer, then this is understandable. Instead, the company can work for it’s known to be famous and to bring up more beneficial people for their business.

 

For example, the company which offers services related to law at the same time with loan servicing might be interested in paying for future lawyers than farmers. Here I will outline several reasons why you should choose a private lender company or not and fundamental differences between federal student loan consolidation and private debt consolidation. The topic of differences between loan types is broad enough; that’s why it would be more efficient to look at a narrower spectrum, loan consolidation.

 

Private loan consolidation

 

I’ll write about federal student loan consolidation later, but it is important to note that you will probably not receive advantages like in federal debt consolidation.

For private student loans, you need to find a lender to finance your consolidation program. Those lenders are separate bodies and have their own rules. You can be surprised about the consolidation amount difference between federal and private consolidation programs for the same amount of loan. Companies often lend a small amount of budget. This has liable for financial reasons. But it is also possible to obtain a high amount of money for consolidation which is frequently regulated by your credit history.

 

If you were an excellent payer during your past credits, then you might accept more than $15.000. As the payment, the company regulates the repayment plan as well. However, there are companies which give your flexibility in your payment period depending on your interest rate. The risk of paying much more than you owed for the private company is somehow similar to federal loan consolidation opportunities. Some credit specialists say that if you have an outstanding credit history, you might get lower interest rates than that of federal loan consolidation. “The private companies pay special attention to your past credit history” once an expert reported.

 

A smart move in the consolidation is paying a significant amount of your loan or have a secure job, and employment history. Keep in mind that if you have decided to change your loan servicer, you will lose all benefits from the previous company. In all cases, it a thumb rule that you have to be extremely careful with regulations while signing the contract with the lender. One cannot consolidate his private loan with federal together. Another critical issue is that having 50 – 100 credit points enable you to obtain a much lower credit rate. There is another option of refinancing that I will talk later on this article.

 

Credit score

 

 

Often you confront the idea of credit score during your private debt consolidation. But what does credit score imply? Is it ok to have a higher credit score or not? Credit score preliminarily defines eligibility of consolidation.

The procedure starts with reporting your credit history by one of the following agencies.

 

  • Equifax
  • Transunion
  • Experian

 

The report by those companies shows your previous credit card balances, loan payments, and your monthly expenses. Your mortgages, houses are included in that score as well. The most famous credit score is the FICO score. In our previous posts, we have described what does the FICO score means, how it is calculating and in which ranges o FICO score your qualification to the loan consolidation can be determined. Usually, the score is between 300 and 850. If your FICO score is more than 600, you are eligible for most of the consolidation and other types of refinancing opportunities. You need to get a copy of your credit score report, which is obtained by the Annual Credit Report.  

For ordering the report, you should visit the annualcreditreport.com. For the free report, you need to fill your name, surname, address, and birth information. The social security number must be provided as well. Because the company has to know much about you for you to be selected.

Obtaining the credit report will help you to fill all of your information accurately. Otherwise, your identification might take long, and you would have trouble during your loan obtaining or consolidation process. And one more advantage of the credit report is that by providing your information to the company, you get protected. You won’t need to worry about stealing your information by someone to get a loan or consolidate their loan. As long as your social security number, birth information has been uploaded to the system. Then you are 100% safe against virus-like fraudulence.

 

Inaccuracies in the credit report

 

If anything wrong happens and it is not related to you, then either your servicer or the company who provided information is responsible for that. Under the law, you can ask any of them to correct their mistakes.

 

What should be done?

 

First, you should write to credit reporting company and implicitly explain what is wrong with the report. The reporter company receives your application and starts the proceeding. Usually, the result of your ask about the report which is an essential part of student debt consolidation process will be given back within 30 days. The company starts investigations. This investigation often involves a third party.

 

This third party can vary depending on what the inaccuracy was. The request sent to the third party, and after the whole process completed, you get notified about results. Your correct data are distributing to all of the three companies we mentioned above. The data is corrected in all of the services. If the problem is due to the servicer, then you should write to them. It’s the company’s responsibility to contact the credit score reporting agents.

 

Consolidating federal student loans

 

With a different name, federal student loan consolidation is governing by the department of education. Here is the servicer, loaner, and lender taking part in the process. The federal loans, like direct and Stafford loans, plus loans, nursing program and federal nursing loans can be consolidated. Some loans can be subsidized loans and unsubsidized like Direct loan. And some loans are not eligible after now, such as Perkins loans. But if you have loaned with the Federal Perkins loans, then you can consolidate your old amount. But before the consolidation process, you either need to pay all of your defaulted amounts or come to an agreement with your servicing company that you will payback them as soon as possible.

 

The PLUS loans which enable parents to pay instead of their children can be consolidated through the federal student loan consolidation programs. There are many benefits of student federal debt consolidation, and I will list them below. But before it is crucial to mention that, you need to be careful, to make loan calculations to see that it will be beneficial for you. There are pros and cons for each type of student loan consolidation.

Direct loan consolidation

Pros

 

  1. In the case of having a Direct loan, it might be the best move to consolidate your loans. It will simplify your loan terms and regulations and will make to pay one bill instead of multiple bills per month.
  2. To consolidate can be resulted in the lower monthly payment. The servicer company wants you to stay with them more. They usually have many options for you to choose from. You can pay in 5 years and 20 years, depending on how much you can pay in a month.
  3. A chance of being nominated by the Public Service Loan Forgiveness is worth to attempt. In case of proceeding the consolidation process of loans other than Direct loans, then you might be selected for the PSLF and even income-driven repayment plan. The chance of this to happen is the highest under the William D. Ford act. You will read about this unique program later in this article.
  4. The interest rate change is still possible. As we mentioned above, you ought to pay additional money for interest rates. Those interest rates can be fixed and variable. Unless with variable interest rates sometimes you can pay much less than that of fixed interest rates, the opposite is possible as well. When you consolidate your federal loan, then you might have a chance to convert your variable interest rates to fixed rates.

 

Once you have consolidated your loan with the federal loan consolidation and utilized from services of one servicing company, then you are at safe. But it is temporary as well. There are many people around who firstly used one company and then changed it to another. But in this case, you will lose all of the advantages you earned from the first company.

For example, if the first company can wait for the grace period after you are graduated and do not charge you for this period, the second company might not agree with the same thing. It varies from one company to another. That’s why it is essential to carefully read every single article of the agreement between you and the servicing company.

Moreover, if you convert from federal student debt consolidation to private loan consolidation, then you will lose all of the advantages that the federal loan gave you. As I stated above, the government takes everything into account, and your payment and repayment plans are regulated and moderated by the rules state set. It is better not to change your consolidation plan from federal to private.

 

William D Ford Act

 

Through this program, one student can get almost the most minimum interest rate possible. It has several names, like the direct loan, Stafford loans. The department of education is one every single action that you are attempting with the William D Ford Act. As the first step, the student must fill the FAFSA application first. This application is provided by federal student Aid. The debt consolidation via the William D Ford Act is almost the same with the direct loan consolidation I mentioned above.

 

Do you have any other option?

 

Yes, sure. If you evaluated the loan consolidation process with the help of both federal and private consolidating loans, but you do not consent with any of them you have the second option. The student loan refinancing is an option as well.

 

The refinancing option serves for facilitating the process of the less monthly payment. The refinancing companies, usually banks, pay your loan. In this case, you do not have to pay all of your student debt. There are many differences between student loan consolidation and student loan refinancing.

 

 

Both of the programs have drawbacks. Everything depends on the agreement regulations and transparency of the servicing company. You probably heard about the Navient lawsuit. It was one of the most famous companies in debt consolidation and refinancing. Misusing of the authority and actions intending to mislead people brought the end of the company. At least, the company lost most of its functions.

 

Ms. Rebecca Safier, the professional journalist, says that if you intend to simplify your loan conditions then use debt consolidation. But if you rely on your income and loan history, then why not to refinancing loans? With consolidation, you might be eligible for the variety of payment options like PAYE, REPAYE and Income-based payment. The last is the most preferred and famous. But paying based on your income might cause trouble as well. Because if your payment fells down one month, then in the next months you either pay more, or your repayment period get elongated. PAYE stands for pay as you earn. Usually, this program is for the long term. The drawback of the PAYE is that it extends your struggling with loan problem.