Finance and Credit Professional

Student loan debt continues to rise each passing year, and college costs, including graduate school costs, have outpaced inflation while federal student loan interest rates are close to record lows. According to studies conducted by the National Center for Education Statistics, it is believed that approximately half of recent college graduates have student loans that, on an average, are in the range of $10,000. Along with such loans, the average cost of college is becoming twice as expensive as the rate of inflation.

Requirements Include Grace Period and Active Repayment of Debt

In order to be eligible for student loan debt consolidation, the student should no longer be enrolled in school and must be in the “grace period” of the loan. Or he should be in the process of actively repaying the loan, and the minimum loan amount required by most consolidation companies works out to $10,000 typically.

Through some student loan debt consolidation programs it is possible for the students to obtain cash back for consolidating their student loans. And, the bigger the balance is, the more money is returned. Also, interest rates can be low and not exceed 5.4 percent and there is also facility to obtain a one percent reduction after 48 consecutive on-time payments.

In addition, the better student loan debt consolidation programs do give a quarter percent interest rate reduction when the student uses his or her automated debit program to repay their loans. There may also be no fees or prepayment penalties as well as just one monthly payment to a single lender. As is the case with any other debt, student loan debt may have an impact (negative or positive) on the student’s credit as well influence future decisions. For example, a student that has a student loan debt in excess of 8 per cent of their income will have their credit seen negatively when being assessed for future loans.

In order for the student to take student loan debt consolidation, he or she should be in grace, repayment, deferment or default status and student loan debt consolidation would result in a 0.6 percent lower rate of interest in case the student is consolidating variable rate Stafford loans during their six month grace period.

The student should be careful before taking to student loan debt consolidation and it is advisable for them to consolidate at current interest rates and hope that the rates will go down in the future. For students that have taken consolidation during their grace periods, it will go into repayment once the consolidation gets finalized and will thus result in forfeiture of the grace period.

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