by Bo, June 10, 2011
With average student loan debt now averaging nearly $24,000 upon graduation, many recent graduates are faced with a tough situation: paying multiple loans every month. All of the loans come with different due dates, different interest rates, or even different loan terms. Even if you’ve borrowed only Stafford loans, each individual semester will count as a separate loan, meaning a college student taking four years to graduate and only borrowing Stafford loans will still graduate with eight separate loans. Having to pay all of these different loans with separate personal checks can be time consuming and frustrating.
If you’re confused by your student loan debt, and have even had problems paying on time simply due to the fact that you can’t keep your student loans straight, you should consider a student loan consolidation. The first step to student loan consolidation is to gather information about your student loans. Find out account numbers, balances due, interest rates, and who owns your student loan debt. This will help a loan consolidation service start the consolidation process, and you will be able to find out how much your consolidation loan payment will be per month. An easy way to make these payments is to order checks online and make your payments each month to these loans.
Student loan consolidation does not mean that a company is paying all of your student loan balances and you pay the company; instead, you are actually receiving a new, larger loan that will be used to pay off all of your student loan balances. Instead of paying eight, or ten, or fifteen different loans every month, you’ll only be making payments on the consolidation loan.
Depending on the type of student loans that you have, you may be able to consolidate student loans through a government consolidation known as the Federal Direct Consolidation Loan. Many government insured student loans, including Stafford loans and Parent PLUS loans, are eligible to be consolidated under this program. If you have private student loans, there are companies that specialize in private student loan consolidation.
Besides the benefit of having one monthly bill, a student loan consolidation could also save you money on interest payments. To see if you can save money on interest, calculate the average interest you pay on your current student loans. Compare this amount to the interest rate offered on a consolidation. For example, the interest rate on a Federal Direct Consolidation Loan is, at maximum, 8.25%, and is fixed. If you are paying more than that amount, or if your student loan interest is variable and is likely to rise, you could save money in the long term by consolidating your student loans.
One quick tip I would like to share is that when paying any of these loans, make it fun. You can use standard checks from your bank or you could make it fun and get some cute checks like dog checks or sports checks to simply add a smile to someones face when they process your payment.