Advice on How to Consolidate Student Debt

By: Kerry Ng

Being a student today can be quite difficult. Try to get excellent grades and at the same time trying to raise money for tuition fees can be quite the challenge. It's even more challenging when you finally graduate with great marks and then face the real world. Next thing you know, your student loans will be coming due. And for some students, the size of the loan can be huge and it may feel like it's going to take all of eternity to pay it off bit by a bit. Fortunately, there is a way to consolidate student debt, thus making it easier on you.

What Is Consolidation?

You might ask, what does it mean to consolidate student debt? Often times when a student finishes their schooling, chances are they are going to have several different loans. You maybe one of those students that had to take on a loan for each semester while you were in school. Or perhaps you may have switched schools or taken a vacation overseas, which means you may have even more different loans from different lenders. In a nutshell, when you consolidate student debt, all you are doing is to take all of these loans, put them together and sell them to one agency. This agency has now have bought all your debts and they will pay off all the lenders all at once and now you owe this agency for that total amount. The difference here is you now owe just one loan to this one agency, instead of many loans to many lenders.

So What are the Benefits?

So you may ask yourself, just what are my benefits in consolidating my student debt to just one agency? Many students will not consider this option because they feel that the agencies will charge them extra money and it's just not worth it. While it's true that these agencies will charge you a fee, which is how they make their money, over the long-term it's actually going to benefit you. In fact, they may even have a slightly higher interest rate on this one big loan. However, your monthly payments will be drastically lowered if you consolidate your student debt and you will be paying interest on one amount, therefore in a long run your interest payments will be less.

How to Consolidate Student Debt

If you decide you would like to consolidate your student debt, there are many ways to go about it. The first thing you should do is to check with your individual lenders to see if they have any ideas of programs that you can use. After that, there are many agencies that can help you through this process. Just do a search on Internet and you will see there is no shortage of agencies. Just make sure that you do your homework first and ask for lots of references. If you have any doubts about your ability to repay a loan, there is a new repayment option now available for some federal student loans. You can repay on an
"income contingent" basis. Basically it means that your financial income will determine the amount of your monthly payments. Your lender should have information about this.

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