Managing debt can be overwhelming for anyone but it can be devastating for a college student that doesn’t know anything about debt management. Many of today’s graduates will be or have graduated with a staggering amount of student loan debt. These young adults are graduating with huge amounts of student loan debts without any understanding of what they can do to better manage their debts and finances. Students that chose to get a student loan consolidation loan almost always have a better opportunity to manage their finances better than those that attempt to pay each loan individually.
A student loan consolidation is a loan that takes all federally backed student loans into one loan. This will effectively pay off each individual loan, combine them all into one and issue one interest rate. There are many benefits to graduates applying for and being granted this loan.
Student Loans and the Reality
Repaying student loans can be a nightmare for any student that doesn’t have the income to pay the given repayment schedules in a timely manner. What most students don’t realize is that every time they apply for and is given a new loan, the new loan is a separate loan that has to be repaid. After 4 years and multiple loans, there are some students that have as many as 8 student loans that have to be repaid in a timely manner. This can be hard for anyone to manage. A consolidation loan will eliminate the need to juggle 8 different payments to different loan holders.
One of the biggest advantages of consolidating student loans into one loan is the management and preservation of a student’s credit score. When students graduate or are no longer in school, their student loans become active for repayment after a grace period. With multiple loans being active and little to no income, many students’ credit scores and reports take a beating. When these loans are paid off due to consolidation and one loan is active, credit reports will only show one loan which looks much better. As payments are made in a timely fashion, their credit score will continue to improve.
Students that decide to consolidate their loans find it’s easier for them to construct and maintain a budget. It’s easier for them manage one payment instead of several. Not only are payments easier for them to manage, it’s easier for them to find a repayment schedule that will allow them to pay their loan off faster.
Managing student loans is something that most people have a hard time with when they first graduate. Many graduates often worry how they are going to pay their loans because they don’t have an income suitable to pay their debts. When students opt to consolidate their loans, they find they don’t have as much to worry about because it’s one loan payment. They are also often shocked to find that their payment is less than their other payments combined.
While some students don’t have a lot of student loan debt, there are millions of others that do. Those are the students and graduates that would benefit from student loan consolidation.