- March 17, 2017
- Posted by: Alyssa Plumb
- Category: News
Should you consolidate student loans?
Debt consolidation is a really great way to try and get out of debt. Those who are struggling under enormous piles of debt often consolidate it all into one loan with one monthly payment to help pay for it all. As you are considering all your debt and how much you need in a personal loan to pay it all off, you may be wondering, should you consolidate student loans? It depends on your situation.
Government-owned student loan debt
It used to be that students could choose to get federally subsidized student loans through either banks or the federal government. However, Obama changed that in early 2010 when he signed a student loan overhaul bill that required federally subsidized student loans to go through the federal government. It also dropped the interest rate on student loans to practically nothing and limited the percentage of income paid to the loans to 10%. Plus, anyone working in public service can get any remaining student loan balance after 10 years forgiven. Everyone else qualifies for forgiveness after 20 years as long as they’ve been paying that 10% monthly payment.
For people who have these types of loans, you are much better off sticking with the deal the government has given you than consolidating your debt into a personal loan. The interest rate is already really low, and there are many programs to help if you can’t afford your payments.
The only down side to student loans is that you cannot get rid of them in the event of a bankruptcy, so you should make sure you never default on them.
Other types of student loan debt
The real problem comes with other forms of student loan debt that come in the form of private loans from banks. Many students get these loans without realizing how hard it will be to pay it all back and with different interest rates and banks every year of college.
If you have private bank loans you used to pay for your education, it is very helpful to consolidate them with the rest of your debt into one monthly payment. The goal of debt consolidation is to pay off all your debt a little easier with one, easy, monthly payment. For this purpose, it is a good idea to consolidate your student loan debt.
A personal loan to consolidate debt
To consolidate your debt, you need to figure out how much money you need to pay off all your debt and then apply for a personal loan online to cover that total amount. The nice thing about a personal loan is that it is very flexible. You can essentially pick your terms, and then you will have one, fixed monthly payment. You will know exactly how much money is expected every month and exactly how long it will take to get all your debt paid off. With interest better than credit cards and many private bank loans, an online personal loan will definitely help you save a lot of money and get out debt faster.