4 Types of Student Loan Debt Consolidation that Have to Know

If you have several student loans to repay concurrently, it can be hard and difficult to manage financially. Luckily for students, there is the option to consolidate all student loans together. We call Student Loan Debt Consolidation.

What is student loan debt consolidation?

It simply means consolidating all student loans into one, so you only have to make monthly payments to one lender rather than several. The advantage is that you pay lower interest rates and most student loan debt consolidation has a period of higher payments.

There are many financial institutions and banks that offer student loan debt consolidation. They will pay off existing student loans each lender. They will then consolidate into one loan. New interest rate student loan debt consolidation is then calculated by taking the average interest rate of your previous student loans. That's why your student loan debt consolidation interest rates lower.

Some student loan debt consolidation can be paid at a fixed interest rate even though so be sure to check with your lender first.

There are 4 types of student loan lenders debt consolidation plans available from each with pros and cons.

1. Standard Payment Plan

Standard payment plan offers a maximum of 10 years to pay off your student loan debt consolidation at a fixed rate. Payment is calculated by dividing the number of loans in that period at a fixed interest rate.

2. Extended Payment Plan

There is also a choice of repayment plan is extended. This is the same as the standard repayment plan unless he stretches the maximum repayment period of 30 years. The length of repayment depends on the total loan amount.

You should note that you may end up paying more by selecting a repayment plan is extended for a fixed interest rate. On the other hand, the monthly payment would be easier to handle, so you'll have to decide how much you can afford to pay each month.

3. Graduated payment plan

Graduated payment plan has a maximum repayment period of 30 years with extended repayment plan. However, the amount of your monthly payment will increase every two years.

4. Income Payment Plan

Repayment plan for income, monthly payments are not fixed. But is determined by several factors such as the amount of total student loans, family size and income level you are. The maximum repayment period is 25 years.

So how do you decide which student loan debt consolidation is right for you? Here are some tips. If you are close to paying back your student loans, then there is no need to get a student loan debt consolidation unless you estimate the cash-flow problems in the coming months. Consider your financial status now and in the coming months or years. Are you able to pay the loan comfortably? Getting a new student loan debt consolidation is also a good way to improve your credit score because you have effectively clean your old student loans and get a new one.

By Ricky Lim