| If
you are a student (particularly if you have attended
graduate school or business school), you are probably
mired
in debt with all kinds student loans. A recent
study points out that on the affordability scale, we are
just not doing a great job in providing Americans with good
education at reasonable cost. When I got out of
business school, I had over $100,000 in student loans.
Fortunately I was single but many of my classmates were
married, had kids, and owned houses as well. Should you consolidate student
loans?
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You should for
the same reasons that you
refinance
your mortgage. When you consolidate your student loans
along with other loans, your original loans are paid off in full in return for a new loan for the combined balances.
The new loan will typically have a lower interest rate that is fixed for the life of the loan.
However, it depends how close you are to paying off your
loans. It depends on how much you owe and what interest
rate you have. It is easy to find answers to these
questions by visiting the websites of financial institutions
that provide calculators to find out if it is worthwhile to
consolidate and how much will you save. The new interest rates for consolidated
loans
The interest rate for consolidation loans is calculated by taking the weighted interest rate of all the loans being consolidated and rounding up to the next nearest
0.125%, with a cap of 8.250%. (Related:
Personal finance for empty nesters)
|
 What about the savings with loan
consolidation?
It will depend
on what you are currently paying, what the new interest rate
is, and if you decide to extend the payment period.
Chances are that you will save a ton of money with loan consolidation. Those with
good credit
histories, have
always paid their bills on
time, and agree for automatic
deduction from their checking accounts can get further
discounts.
Who should you approach for student loan
consolidation?
You can
approach any financial institution that participates in the Federal Family Education Loan Program.
Some of these institutions that are active in this are Ameriquest,
LendingTree,
and others.
What else is important with regards to
student loan consolidation?
Any loan
consolidation should be part of an overall strategy to better
personal finance management. Some of the things that I
have learned over the years is never to spend more than you
earn, always save some for unforeseen
circumstances, keep
track of where the money is going, and always keep researching
new ways to save.
Recommended: Personal
finance tips
Should I get a credit card
How
to get away from debt after bankruptcy?
How to avoid foreclosure
Debt relief tips
Money tips for couples |
