Student Debt Consolidation Loans - An Overview

According to the U.S. Constitution, education is a fundamental right of every individual. Sadly, at the present, only a small percentage of U.S students are able to bear the increasing costs of education.  For others, getting student loans is the only option.  In comparison to federal student loans, private loans are disadvantageous in many ways as these loans tend to have higher interest rates and also private companies charge higher fees to customers.  Also, some of the options such as loan cancellation or loan forgiveness available with federal loans are not offered under private loans.  As a result, these loans become unmanageable at some point in time with many students ending up as defaulters at the time of graduation.  Student debt consolidation loans provide a great opportunity to such students and enable them to manage their debts conveniently.  In debt consolidation loans, a lender pays off all the existing debts of the borrower.  The combined value of all the previous loans is then issued to the borrower as a new loan with different terms and conditions.  

Why is it important to consolidate student debt? There are many positive consequences of consolidating student loans, due to which student debt consolidation loans make an ideal choice. Some of these advantages are outlined below.  

• Lower your monthly payments – This is one of the most significant reasons to consolidate student debt where borrowers will be paying less towards monthly repayments. This is because the loan payback period is longer and the interest rates are low on private debt consolidation loans for students.  
• Debt consolidation loans reduce the stressful burden of managing multiple loans or keeping track of multiple debt payment schedules. All that the borrower, who has opted for a debt consolidation loan, needs to do is to make one single monthly payment on a regular basis.  
• Student debt consolidation loans also help in improving credit scores. Nowadays, credit records are being assessed for every purpose including employment, buying any car or property, getting a house on rent and even for providing utility services. For students, who had recently graduated from colleges, may no longer be able avail any of the above listed benefits without good credit records or when they maintain multiple loans during student life.  When you consolidate student debt, you can easily solve all these problems and get your life back on track.   

Apart from these, many lenders also offer several other benefits to students willing to consolidate their loans. One such benefit is the graduate repayment plan, where the repayment amount is dependant on the income of the borrower. In this, the student will be paying less during the initial years as he/she will be earning less. As the income will increase in the subsequent years, repayment amount will also increase in a similar proportion. Some lenders even allow borrowers to defer their loan payments for a short duration. This deferment allows students to start living on their own and earn for their survival. Also, a significant portion of interest rate paid on student debt consolidation loans is tax-deductible.

At present, there are many private student loan lenders operating in the market. Popular among these include Sallie Mae, Citibank and Bank of America.  Students are required to shop around, obtain quotes from different companies and negotiate with the lender about the charges and interest rates so as to obtain a best deal. Also, one must remember to carefully read and understand all the points mentioned in the loan agreement before signing the document.