Student loans are two-edged swords. Devoid of them, you couldn’t pay for that degree you worked so hard for. On the other hand, without them, you might truly get to keep the sum you pay out each month for yourself. You might get to pay your other bills punctually, pay for a more reliable automobile, or find a better place to live.
If repaying your student loans is challenging your budget, or worse, putting your finances – and credit rating – in the red, you might want to consider a direct student loan consolidation.
With a direct student loan consolidation, you exchange your outstanding student loans with their higher interest rates for one loan with a more handy, fixed interest rate.
A direct student loan consolidation may be the answer to more than one problem. If you have struggled to meet your monthly payments and in reality have used every opportunity for deferment or forbearance your existing loans offer, or find yourself about to default on your loan, a direct student loan consolidation can mean a new start. A new loan is often a clean slate.
Not only do deferment and forbearance options become accessible in case of need again, but often direct student loan consolidation gives you a much lower interest rate – as much as 0.6 percentage points – so lowering your monthly payments. And when you consolidate those student loans under a new loan, those loans show up on your credit report as paid off, and your credit score benefits.
There are four plans for repaying a direct student loan consolidation that you many want to consider as you consider which is best for your needs.
The primary plan is a Standard Repayment Plan and gives you a fixed monthly payment for up to 10 years. The Extended Repayment Plan besides sets fixed monthly payments, but the repayment period is set between 12 and 30 years, according to the total sum you use. In this plan your payments are lower for the reason that they are spread across a long period of time. Keep in mind, still, that making payments over longer periods of time means you will end up paying out a bigger sum amount.
The third option is the Graduated Repayment Plan. This is another direct student loan consolidation plan with a repayment period between 12 and 30 years, only in this plan the amount of your monthly payment will boost every two years.
To conclude, if you have a work and family, the Income Contingent Repayment Plan may be what you’re in search of. This plan sets a monthly payment based on your annual gross earnings, family size, and total direct student loan debt, and spreads those payments over a period of 25 years.
While direct student loan consolidation may be the best way to get on top of student loans for some, if you are close to paying off your existing loans, it may not be worth it in the long run to consolidate or extend your payments.
But, if you are still seeing loan payments coming out of your pocket well into the future, take into account the direct student loan consolidation seriously. If you consolidate your loans while you are still in school, you may qualify for a 6-month grace period before repayment begins. You may find you will be able to keep any subsidies on your old loans.
Lower your monthly payments, improve your credit rating, gain control of your loans, and give yourself peace of mind about the outlook with a direct student loan consolidation.
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