Consolidate Student Loans
Do you really need to consolidate your student loans? If you’re unsure about what you should do then you need to understand what a student consolidation loan means.
Student loan consolidation is getting all your debts under one lender. For example you have a loan with lender A and lender B. When you consolidate you put both loans with A and B together with you new lender C. By consolidating your student loans you can lower your monthly repayments. We’ll get to that shortly.
Federal Student Loan Consolidation
The most common time to consolidate your student loan is when you finish your studies. However you must be eligible to consolidate your student loan first. To be eligible to consolidate your federal student loan you must be:
- No longer enrolled at any school (or enrolled for less than half time)
- In the ‘Grace Period’ which is 6 months after you graduate OR must be actively repaying of your loan.
- Have a minimum of $10,000 in debt (there are lenders who will go as low as $7,000)
Ok, What’s A Federal Student Loan & Private Student Loans?
Having a federal student loan will give you more benefits than a private student loan.
- Interest is 100% tax deductable
- You can defer your payments on federal loans if you go back to study.
Private loans have no advantages because it is similar to a personal loan. If you get a secured loan you’re rates are better if you get an unsecured loan you’re limited with the amount and you’re rates will be slightly higher.
Remember when you consolidate your student loans to keep your government federal student loans separate from your private student loans. Don’t consolidate them together or you’ll loose out on benefits.
Getting Student Loans
Did you know that 50% of all students who graduated had taken out a student loan of some sort? And the average amount borrowed was on or about $10,000. The interest rates for student loans in the past few years have dropped. Every year on the 30th of June new interest rates for student loans are released.
When you get a student loan make sure you don’t get an outstanding debt. Some students get loans of up to $80,000 which makes repayments extremely hard unless you’re pretty well off.
The best tip you can get is “Don’t over borrow” because you’ll have to pay it back one day. And when you over borrow it will affect your future credit ratings. If you’re repayments are well over 8% of your income you might find it hard to get mortgage after graduation. So keep you borrowing to a minimum.
