Anyone who knows me knows how strongly I feel about student loans and debt: avoid it at all costs! But if you couldn’t its important to know whats about to happen to your loans if you don’t act now. With the average student loan debt at around $24,000, its important to manage that student loan debt. Even worse, a trillion dollar debt load is headed for a debt explosion that could be extemely taxing on our economy. Whats worse, the new student loan bomb is about to double to interest on student loans of anyone who hasn’t consolidated as of July 1st this year.
In 2007, a bill that curbed the rise of student loan interest helped keep the loan rates low was passed, that expires this year. The rate will jump from 3.4% to 6.8% in one day. So if you don’t act to consolidate your outstanding loans you cost of payback is going to significantly increase, along along with your average payment.
Here’s what consolidation offers:
1) Locks in your interest rate – consolidating your many loans will lock the rate at its current level for the duration of your payments. This allows new graduates time to plan for their payments and know they will remain at the same interest rate throughout their payout period,
2) Combines loans into one payment – oddly enough, most people don’t know what bank provided their loan. However, when you graduate those loans will come due at different days of the month with possibly different providers. Consolidating puts them all in one basket for good, and makes management easier.
3 Makes applying for an IBR or Graduated Repayment easier – lets face it, many students leave school with alot of debt, but without a large salary to cover the debt payments. Many turn to the Income Based Repayment or Graduated Repayment plans to lower costs on the front end. But rather than apply for these with each lender, consolidation will allow you to do it once and have one point of contact.
Look, no one likes student loans. But if you have them, you need to manage them ASAP before your costs jump through the roof. To get you started, check out NelNet and Sallie Maesee what plan is right for you and how you can save.