STUDENT LOAN DEBT Student Loan Debt Consolidation means consolidating all your student loan debts into one so you only have to make monthly payment to one lender. The advantage is lower interest rates and most loans have higher repayment periods.
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Student Loan Debt Consolidation Plans
There are 4 different types of student loan debt consolidation plans available from lenders.
Standard Repayment Plan offers a maximum of 10 years to repay your student loan debt at a fixed rate. Payments are calculated by dividing the loan amount within that time period at a fixed interest rate.
Extended Repayment Plan 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 may end up paying more with this plan because of fixed interest rates but your monthly payments are easier to manage.
Graduated Repayment Plan has a maximum repayment period of 30 years (same as extended repayment plan). However, the amount of your monthly payments will increase every two years.
Income Repayment Plan does not have fixed monthly payments and it is determined by factors like total student loan amount, income level and family size. The maximum repayment period is 25 years.
How do you decide which student loan debt consolidation is suitable for you?
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 near future. You should always consider your financial status and loan payment affordability in coming months. 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.
