The 4 Types Of Student Loan
Debt Consolidation |
By Ricky Lim |
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If you have several student loans to pay concurrently, it can be
hard and financially difficult to manage. Luckily for students,
there is the option to consolidate all your student loans together.
We called it Student Loan Debt Consolidation.
What is student
loan debt consolidation?
It simply means consolidating all
your student loans into one so you only have to make monthly
payments to one lender instead of several. The advantage is that you
pay lower interest rates and most student loan debt consolidation
have higher repayment periods.
There are many financial
institutions and banks that offers student loan debt consolidation.
They will pay off your existing student loans to their respective
lenders. They will then consolidate the loans into one. The interest
rate of the new student loan debt consolidation is then calculated
by taking the average of the interest rates of your previous student
loans. That is why your student loan debt consolidations interest
rate is lower.
Some student loan debt consolidations are
payable at a fixed rate though so be sure to check with your lender
first.
There are 4 different types of student loan debt
consolidation plans available from lenders each with its pros and
cons.
1. Standard Repayment Plan
Standard Repayment
Plan offers a maximum of 10 years to repay your student loan debt
consolidation at a fixed rate. Payments are calculated by dividing
the loan amount within that time period at a fixed interest rate.
2. Extended Repayment Plan
There is also the option of an
extended repayment plan. It is the same as standard repayment plan
except it stretches the repayment period to a maximum of 30 years.
The length of repayment is dependent on the total amount borrowed.
You should note that you may ended up paying more by opting for an
extended repayment plan because of the fixed interest rate. On the
other hand, the monthly payments would be easier to handle so you
will have to decide how much you can afford to pay each month.
3. Graduated Repayment Plan
The Graduated Repayment Plan has
a maximum repayment period of 30 years which is the same as extended
repayment plan. However, the amount of your monthly payments will
increase every two years.
4. Income Repayment Plan
For
income repayment plan, the monthly payment is not fixed. Rather it
is determined by several factors such as your total student loan
amount, the size of your family and your income level. The maximum
repayment period is 25 years.
So how do you decide which
student loan debt consolidation is suitable for you Here's a
few tips. If you are close to repaying your student loans, then
there is no need to get a student loan debt consolidation unless you
foresee some cash-flow problems in the coming months. Consider your
financial status now and in the coming months or years. Are you able
to comfortably pay the loan? Getting a new student loan debt
consolidation is also a good way to improve your credit score since
you have effectively cleared your old student loans and getting a
new one. |
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