After four years (or five or six depending on your employment status) of essay writing, cold pizza, and overpriced parking rates, I couldn’t believe I was finally walking away with my diploma and into a life of independency and…debt?? Starting life as a hard working, 9-5 adult with mounds of student loan debt is no fun, but unfortunately it has become a reality for many students like me who depended on loans to get through college.
Do not feel guilty; student loan debt is not the same as credit card debt because your student loans were used towards a very worthy cause. These loans helped you get a college education and will indirectly help you land a successful career if you play your cards right. For this reason, student loan debt is taken with a bit more understanding and respect.
So how can you pay off 10, 15, 20 thousand of dollars in student loans right out of college? First of all, don’t worry; repayment options for student loans are surprisingly flexible, no matter what you owe. If you have more than one type of outstanding federal loan, federal student loan consolidation is designed to help you pay off the loans and keep them from becoming a major obstacle in your rise to the top.
After college, you are not required to start making payments on your loans until six months after graduation. This gives you a window period in which you should be shooting out resumes and getting your name out in the job market. However, once your pay period begins, it is critical that you make your payments on time. Student loan consolidation makes it easy for recent graduates to start making reasonable payments on loans in one easy payment, as opposed to one for each type of loan.
The U.S. Department of Education’s Federal Direct Loan Repayment Program is the most common type of federal student loan consolidation that simplifies loan repayment by combining several types of Federal education loans into one new loan. Combining several loans that may have different terms and repayment schedules can yield lower interest rates as well as monthly payments. In addition, the repayment time may be extended beyond what separate loan programs typically offer. These aspects of student loan consolidation normally result in more manageable debt and can prevent one to default, or fall behind, on their loan repayment schedule.
Students who have both direct loans and other federal student loans may apply for a federal student loan consolidation. Even those who are still in school and those who are already in default on their loans may qualify. If you are in default and choose to consolidate your loans, your credit report will still show a paid-in-full default entry. However, federal loan consolidation will limit further collection costs and will allow you to pay off your defaulted loan with the lowest possible payment.
Payments in a federal student loan consolidation plan can be based upon your income. There are several payment plans to choose from to suit your lifestyle. If you are just out of college and are not making the big bucks yet, but have the confidence that you will be making more money as time goes on, you can choose a graduated plan that gradually increases your monthly payments every two years in proportion with your income. For me, this was the most logical plan. Granted, I have just added a $200 bill to my financial slate, but there is not getting around student loan debt. The graduated plan is a great consolidation arrangement because it effectively pays your debt with reasonable payments so you are not still paying your loans off when you are planning for retirement. On the other hand, if you don’t mind it, you can choose to pay off your debt in a 30 year period, which for me created a long-term relationship with debt I was not willing to make. The choice is yours, just make sure you do not ignore it; your debts need to be taken care of early.
By Kelley Caner