Reasons to Consider Using Federal Programs to Consolidate Your Student Debt

 

Finally got out of college? The fun now really starts because you have six months to look for that dream job and then you have to start repaying all those student loans you took out while still in school. But you have heard so much about debt consolidation and you are wondering what's in it for you. Are you thinking what it means to you and your finances? Continue reading and here is a list of reasons why you should consider using federal programs to consolidate your debt.

 

1. A fixed interest rate lower than your existing interest rates combined.

 

You don't believe it? Let us make some rough calculations. Take for example that you have loan A at $15,000 with an interest rate of 8 percent, and loan B at $10,000 at a rate of 10 percent. Interest payment for loan A is $1,200 while for loan B is 1,000. Combined, you have a total loan of $25,000 and interest payments come to 2,200. But with federal consolidation programs, your new rate might be 8% on the total amount.

 

2. You can reduce the monthly payments you make by more than 50% when your application is received during the grace period and when you extend repayment schedule.

 

Congratulations! You got a job sooner than you think. And so, the best thing to do is file for that application of debt consolidation so that you can benefit from reduced monthly loan payments. Also, you can ask for extension of your repayment schedule thereby reducing your debt burden. In effect, you now have more disposable income at your fingertips and your loan payments are not burdensome.

 

Although you may end up paying more interest, but life will not be that hard to deal with if you don't get headaches racking your brains out on where you would find enough money to pay to all your creditors.

 

3. For some loan companies, early repayment carries penalty.

 

For federal consolidation programs, you won't have to pay for any penalty if you ever did made early repayment. It is easy to see why, loan companies want you to be in debt as long as they can because of the interest they earn from you. But if you have the financial capacity to pay off your loans sooner and earlier, federal programs are willing to receive it, not only would it help another student to avail of the loan program, it would also free you up from debt.

 

4. Several creditors equal burdensome paperwork. Therefore, consolidate debt to deal with only one creditor.

 

Yes, you can reduce your monthly bill-paying headaches and paperwork because now you are only dealing with one creditor. No need to keep track of who's due when or how much.

 

5. Federal programs are friendly to use.