After the glee and bliss of graduation condenses into a haze of uncertainty and concern, former students are left with two enormous dilemmas to handle: one is getting a job other than frothing coffee or refilling staplers; the other is paying back student loans bankrolled by the federal government — loans that, like a bull in a china shop, are smashing the delicate shaping of your future.
In the spirit of fair play, the government grants graduates a six month head start on student loan repayment. Afterwards, the accruing amount of principle shifts to a higher interest rate (students are given an in-school break of 0.6 percent) and a beat-the-monthly-clock mentality forms. Sallie Mae, the federally subsidized loan conglomerate that owns or manages 7 million student loans, along with other student loan consolidation centers, offer graduates a chance to trim down these monthly payments and fix interest rates.
The majority of student loans are either Stafford loans (citizens attending college are all but guaranteed a yearly sum of $2,650 through Stafford loans) or PLUS loans (given to parents, rather than students). Interest rates for these student loans shift according to various market factors, bringing an ominous degree of uncertainty to a graduate’s already uncertain future. Ten years is the typical term for the majority of PLUS and Stafford student loans (private lenders also engage in tuition-based loans, which increasingly vary as to terms and interest rates). A student loan consolidation center allows graduates the opportunity to set a fixed-interest rate and possibly extend the loan term to alter monthly payments and total interest expenditures.
In July of 2004, Sallie Mae announced plans to drastically reduce the interest rates for both PLUS and Stafford student loans (Stafford loans went down to 4.06 percent, while interest rates for PLUS loans dive-bombed to 4.86 percent from the 2003 rate of 6.79 percent), making the time for graduates to contact a student loan consolidation center now.
By averaging the varying interest rates over the history of one’s student loans, a consolidation center fixes the future interest rate of the consolidate loan (whose term can be extended beyond ten years to lower monthly payments). The need for consolidation services is immense and unwieldy, due in large part to soaring national debt averages (males aged 21-34 dole out $222 a month with an average balance of $12,900; women aged 21-34 enjoy a slight reprieve paying $141 a month with an average outstanding balance of $10,300). With tuition costs continually spiking and the job market on the decline, uncovering and implementing consolidation resources for student loans becomes more and more crucial.
Where to Turn
As previously stated, Sallie Mae (one of the government funded lending groups) handles a large amount of consolidation services. Other resources include The Student Loan Consolidation Center (www.slccloans.com) and Collegiate Funding Services. Private lenders additionally offer consolidation loans for graduates.
To Extend or Not to Extend
Fixing the interest rate of your student loan is usually a good idea, but the decision to extend the terms of the loan can become a costly option. Your exact loan situation requires some detailed consideration before deciding whether a loan extension will be a profitable avenue. Student loan consolidation centers often try to squeeze students into long-term loans to continue reaping interest payments; don’t be cajoled solely by low monthly payments, take care to evaluate the exact savings.
Contacting a federally-approved student loan consolidation center is the first step to side-stepping exorbitant monthly payments and unneeded interest charges — just be sure to use that education to make your decision.
By Jean-Pierre Lacrampe