Factors to Consider for Borrowing Student Loans

Under the accepted standards of borrowing student loans, it is stressed that you can borrow up to the cost of attendance, as determined by your school, less other financial assistance you might be receiving.  Other financial assistance refers to grants, work-study, and scholarships.  And, the cost of attendance typically involves tuition, books, fees, room and board, and other miscellaneous living expenses.

Also, the cost of attendance as determined by your school has figures that are meant to apply to a wide group of students. Oftentimes, you may not need to borrow as much as your school allows.  Note that it is best to borrow the minimum amount possible so that you can lessen your overall financial obligation later.

If you prefer to consider borrowing student loans to finance your education, just expect that some of the lenders these days have borrowing limits placed on student loans. For instance, the federal government places annual and aggregate borrowing restrictions on federal student loans, and the aggregate limit is usually the total amount that every student can borrow in the span of his or her education.  Given this fact, it is then necessary to examine and evaluate the terms of every loan you plan to take on for the annual and aggregate loan restrictions.

Aside from that, carefully and honestly assess your current financial status, including any financial commitments you have made before entering the school of your own choice. Understanding the repayment obligations of every commitment you’ve made is the key here. Note that over time you will be responsible for these prior obligations in addition to any education debt you take on, and your education loans are not given to cover these prior obligations you have.

Finally, consider the realistic determination of your future income. You can perform some research on the current job market and start salaries in the area you plan to pursue. Just note that you will be paying for your education with your future income.  So, when choosing a student loan program, be sure to do some investigations on the loans that offer you alternative repayment plans which can assist you in managing your payments, especially early on in your own career.

Are Student Loans Better Than Credit Cards?

When applying for student loans, it’s so important for prospective college students to calculate their finances as best they can to receive the appropriate funding. From tuition and books to room and board, living expenses and food, students should make sure to secure the funds they actually will need to get them through each semester at college.

By applying for the correct amount, students won’t find themselves in a bind or get themselves into a credit card nightmare.

Way too many college students these days get into big trouble with credit cards. It’s unfortunate that students too inexperienced to know better receive enticing credit card offers in the mail. Usually when a credit card offer looms over a student, it’s like dangling a carrot in front of a rabbit. The student grabs the credit card offer without thinking ahead. Credit cards oftentimes appear to be a quick fix or a type of “free money,” and they then become the remedy students think they need.

Student Loans versus Credit Cards

If anything, it’s the opposite. Like student loans, credit card debt must be paid back. There’s a huge difference though. Student loans usually are taken out with fixed interest rates, depending on the type of loan and a students’ credit rating, amount of loan, repayment terms, etc.

However, there’s usually a catch when students receive those “amazing” credit card offers. The catch is sky-high finance charges, some as high as 22 percent! However, oftentimes students don’t think about the finance charges when they accept the credit card offers. It’s kind of like, “I’ll think about that later.”

Some students who haven’t taken out enough student loans to cover their college expenses resort to credit cards to pay for necessities, books and even rent! They’ll use their credit cards to take out cash advances, which usually have even higher finance charges than by simply charging.

Never-ending Cycle of Debt

There are students who accept more than one credit card offer. After hitting the limit on one credit card, it’s easy to accept another and then another, and so on. With the high interest rates and finance charges attached to these credit card offers, students easily can rake up more than they bargain for. When students pay off credit cards by only paying minimum monthly payments, they are making their financial situation worse. Finance charges accrue month after month. It could take almost a lifetime to pay off the credit card bills.

How to Get the Most Savings from Student Loan Consolidating

The goal of student loan consolidating is to improve your overall financial picture; whether that means lowering monthly payments, improving a credit score, or reducing debt to income ratio. Student loan consolidating packages offer some of the best money-saving incentives in the loan industry. Understanding how these different incentives affect your repayment can help you to make a smart choice when it comes to student loan consolidating.

The Effect of Interest Rate on Student Loan Consolidating

This tiny little number has the largest overall financial impact in regard to the total amount you will spend to repay your student loan. Even a fraction of a percentage point can equate to thousands of dollars over the lifetime of a loan.

Advertised base interest rates for student loan consolidating are similar from one company to the next. Your due diligence in shopping for a lender to handle your student loan consolidating will truly pay off when you begin to compare interest rate reduction opportunities.

Interest Rate Reductions

Interest rate reductions are money saving incentives offered by companies that specialize in student loan consolidating. Not every lender offers interest rate reductions, and those who do offer a broad range of percentage savings. With a little research, you can find lenders offering total interest rate reductions of up to 1.5%.

On Time Payments Interest Rate Reduction

If you’re planning on making your payments on time anyway, why not be rewarded? Some lenders offer interest rate reductions just for making on-time payments. Some lenders such as ScholarPoint offer a reduction of up to one full percentage point after only 24 months of on-time payments.

Be conscious of the number of months the lender requires before qualifying for this discount. A reduction applied after 36 months into your loan as opposed to 24 months means you'll be paying higher rates than necessary for one full year.

Auto Pay Interest Rate Reduction

Because payments made on time are so important, some lenders will reward you with an interest rate reduction simply for having your payments automatically deducted from your account each month.

Many lenders and government programs offer reductions at a rate of 0.25%. However, with a little research, you can find auto-pay interest rate reductions of up to a full 0.5%. For the borrower, this is a triple win. It means less paperwork, no worries about late payments, and a significant amount of savings over the course of the loan period.

Principal Reductions

A principal reduction is when the lender handling your student loan consolidating subtracts a fixed percentage off of your loan balance. Each lender offers different guidelines for qualifying for their principal reduction benefit. The most common incentive offered is for completing a set number of consecutive on-time payments.

Principal reductions differ from interest rate reductions in that the savings is applied to the remaining balance on your loan but does not affect the interest rate at which you will pay off the balance. While principal reductions may initially seem like a larger savings, you could pay more than if you had chosen a lender offering a seemingly small interest rate reduction.

Cash Back Programs

Cash back programs are exactly as they sound. After a certain number of consecutive on-time repayments, usually 33 months, some student loan consolidating companies will return up to 1% of your original loan and credit this to your remaining balance.

When a cash back incentive is applied, money is actually deducted from the remaining balance after meeting the guidelines of your student loan consolidating lender. For example, after qualifying for a 1% cash back incentive on your $30,000 loan, your current balance would be reduced by $300.

Choosing a Company to Handle your Student Loan Consolidating

Many of the incentives offered are rewards for favorable repayment behavior and are presented through different types of savings packages. Using a Student Loan Consolidating Calculator online can help you calculate the potential savings of your options.

By comparing the options and savings incentives of different student loan consolidating lenders before making a decision you can save thousands of dollars over the course of your repayment term.

The 4 Types Of Student Loan Debt Consolidation

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 consolidation’s 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.

What is Student Loan Consolidation Program?

You are getting a few student loans to support your study. After the graduation, you need to start repaying these student loans. These student loans come with different interest rates and they have different repayment due date for each month. You may find it difficult to manage your multiple student loans and any late payment or miss payment may hurt your credit rating.

Student Loan Consolidation Program is a loan repayment program for college students and graduates with multiple student loans to make their repayment easier. However, before signing on the dotted line, it's important for students to understand some basic facts about consolidation.

What A Student Loan Consolidation Program Does?

The student loan consolidation program allows you to combine all your outstanding student loans. For example, if you have three separate government student loans, you can consolidate them into one single loan. Technically, all three of those loans will be considered paid in full and a new loan will be started in their place. The basic concept is you are getting a new loan to pay off all your outstanding student loans; which mean instead of having 3 student loans with 3 repayment amount and due date, after the loan consolidation, you only have one loan with one repayment amount and one due date. It will enable you to manage your loan easier.

How A Student Loan Consolidation Program Will Help?

By consolidating your outstanding student loans through student loan consolidation program, you basically can enjoy at least 3 benefits:

1. More Convenient

With multiple student loans, you will have to make multiple payments every month; that means there are more paperwork and due dates to keep track of. There are more chances that you may miss one of them and cause you to make late payment. You can get rid of this hassle by consolidate them into single repayment and make you easier to keep track only one payment with one due date and one repayment amount.

2. Save You Some Money

All loans come with interest, so do the student loans. Although student loans normally have lower interest rate, student loan consolidation program may be able to negotiate a lower interest for your new consolidation loan than all your current loan rates and save you some money on interest. For example, you have 3 outstanding loans may be required to make $150 payments each month to all three lenders. That is a total of $450 per month. After consolidation with only one payment is required and that payment is usually much less than the combined payments from all of the loans. This can be huge benefit to you especially if you are new graduate who are just getting started in your careers and who don't have the income necessary to cover large loan expenses right away.

3. More Repayment Possibilities

Consolidating your student loans may open up additional opportunities for you. You may be offered with deferment choices and/more repayment possibilities. These offers can come in handy if you wish to further your education to another level, struggling to find employment in your field or experiencing financial hardships.

In Summary

Managing your multiple student loans are not too hard but you can make them more convenient and easier by combine them into one through the student loan consolidation program and enjoy the benefits it can offers. However, before enrolling into any of the student loan consolidation program, you need to understand the details and ensure the package is really inline with you financial needs.

Debt Management And Student Loan Interest

Student loan interest can now be used as a tax deduction on personal income tax returns, thanks to changes made the United States government and the IRS. New student loan interest rates went into affect on August 1, 2005, changing the previous one. This can greatly help students and parents at tax time.

Despite a federal government initiative to encourage higher education over the past few years, with the offer of deferred loans that include much lower rates than regular or private types of loans, and put off pay back until a student has completed their studies, the impact on new and existing loans is the same. Interest builds over time and interest is made on the balance, which will eventually include some of the interest, itself. The result is that despite less worry about finance during the educational period; the final balance is much higher than before, affecting students’ financial situations and income tax returns.

Initially the government offered a two-pronged opportunity to student loan candidates. The first is subsidized; whereby the government covers the interest until a student’s education is completed because the student’s need for financial aid is higher. The second is unsubsidized whereby the student is fully responsible for dealing with any interest on top of the loan. Private and other student loan creditors also provide a deferred type of personal loan, but the interest rates are higher, the loan is unsubsidized, not necessarily following the government’s strict guidelines, and the student is fully responsible again for paying interest upon interest plus the original loan balance. The private and other sectors have made a high profit industry out of student loans and unfortunately many students do not fully comprehend how interest upon interest works. In a sense, even though some most private creditors do follow government’s rules, debt management and credit counseling services do in fact aid their own profits instead of truly helping students by encouraging them to take out further loans to consolidate their student loan debts which costs students even more money. It is imperative for parents and students to be fully cognizant of their student loans’ conditions and terms, government or private, but most importantly students need to be managing their money by paying of interest as and when it is applied each month. In other words, loan payments may be okay to defer, but do not defer paying the interest.

Managing Your Money And Your Student Loans

If you have a number of outstanding student loans, you may want to consider student loan debt consolidation.  You will eliminate having many bills to pay on your student loans, and the total monthly payments can be significantly reduced as compared to the normal ten year payback option.  A special program called FFEL (Federal Family Education Loan Program)  allows commercial institutions, such as credit union,  banks and other lenders to grant debt consolidation loans for the purpose of consolidating educational debt.  In addition, the William D. Ford Federal Direct Loan Program allows for the federal government to grant student debt consolidation loans.

The majority of federal education loans can be included in these programs,  whether or not they are loans that have been subsidized by the government.  These include the FFEL Stafford loans, Health Education Assistance Loans, Federal Nursing Loans, Federal Perkins Loans and SLS.  Note that private education loans are not eligible for the debt consolidation programs. 

If you need to find out whether your loan is eligible for a student loan debt consolidation, you should contact the appropriate Direct Loan Origination Center, Loan Consolidation Department. For instance, if you have a FFEL loan, contact a participating FFEL lender if you are interested in consolidating a FFEL loan.

You can apply for an educational debt consolidation loan even while you are still in school, as well as once you have graduated, left school without graduating, or reduced your student hours to half time enrollment or below.  If you have all of your student loans with one FFEL lender, you have to obtain your student consolidation loan from that same FFEL lender, except in the cases where the terms of an income sensitive loan are unacceptable.  If you want to be considered for the William D. Ford "Direct Student Loan Debt Consolidation Loan", you have to already have a Stafford student loan (subsidized or unsubsidized) that will be included in the loan consolidation, or have at least one FFEL program Stafford loan to be included in it. Again, this can be subsidized or unsubsidized.

How do you go about choosing an unsecured debt consolidation program?  The first step to take is to meet with a professional to advise you. He or she may be called a debt relief specialist, settlement specialist or client services representative.  This person will answer your questions about the loan.  The main thing about a debt consolidation loan is that it is intended to assist you, not make things better for your creditors.  The company you are working with will handle the negotiations; they are all finance and debt professionals.  This may not be the program for you, but it is worth looking at, and there are many unsecured debt consolidation programs that you can find out about, either by calling or by checking online.

Student Debt and Student Loans

The statistics show that more and more students are graduating from university with significant debt. The debt levels are growing year on year and many students will be paying them off for years after they graduate. It seems that the consumer addiction to credit and spending has effected the student population just as much as every one else. The fact that most students are not earning anything, and are living either on funds provided by their parents, or on money borrowed, they continue to spend millions each year.

These costs are spread over a variety of areas. Accommodation and other living expenses represent the largest portion of the expenditure. Added to this is travel to and from university, holiday and summer travel expenses, and entertainment. While students are generally financially responsible and not as out of control as many patents would have you think, they do continue to spend a huge proportion of their money on entertainment and socialising.

Employment
Many students will also be working part time during their studies. There are a lot of jobs available and finding one is not a problem for most students who genuinely want one. Employers recognise their flexibility and willingness to work unsociable hours and also that they will generally be happy to accept minimum or close to minimum wage. Therefore, while the jobs are there, they generally pay little, and students who work more than 10-20 hours a week are probably putting a serious strain on their studies and risking their future chances of success.

Most student debt is comprised of student loans. The student loans company based on eligibility criteria provides these. These loans are cheaper than credit that is available on the market from high street banks and have other significant advantages for students. Firstly, students will not have to start repaying the loans until they are earning a set minimum amount, currently around the £15,000 mark. Then there is also the fact that loan repayments are calculated according to earnings levels and are therefore always reasonably affordable. Students are giving as much time as they need to repay the loans and the interest rates, as said before, are very favourable.

Overdrafts
As well as these student loans however, many students will also have other forms of debt. Most banks are offering interest free student overdrafts of up to £2,000 and there are not many students who do not use this up pretty quickly. Then there are bank loans, store cards and credit cards. All of these represent a significant amount of debt that most students are living with.