Do you really know why you think you want to consolidate?
By: Genevieve Dobson
Back around 2004/2005 consolidation of Federal loans was a no brainer. You were taking a variable rate loan and locking it into a rate of around 2.875%. Plus if you did your research there were companies out there that were offering even further reductions if you signed up for automatic withdrawal (ACH) and made so many on-time payments. This meant you could get an interest rate as low as 1.625%. Who wouldn’t consolidate their loans with this rate?
Well times have changed. Since 2007 interest rates have been fixed at 6.8% (on average) and private lenders who once funded federal loans have gone away so there are no borrower benefits to decrease the rates. Instead anyone who has taken out loans since then have Department of Education as their lender although this can be confusing seeing companies like Sallie Mae, Great Lakes and Nelnet among others were hired by the Department of Education to Service these loans.I discuss how consolidation of federal loans may no longer be a viable option in my recent video. Make sure you go and check it out: http://www.youtube.com/watch?v=rsOmdvMyqCY
Ultimately the reason for the importance of understanding this is to know that what once was a no brainer now is not financially advantageous. Its crucial to look at the other options available to handling student loan debt so that you make wise choices about your debt. Dont forget that Degrees of Success offers free assessment regarding your debt. Just go to our website at www.degreesofsuccessinfo.com to make an appointment for your free assessment today!
I am in the same boat 15k in debts. I didn’t bother tynrig to get a consolidation loan because I already knew I wouldn’t get approved. What I did do though is go to Money Management International since I didn’t want to file bankruptcy. I signed up for a debt management plan. This plan is similar to a bankruptcy in that you can’t have credit cards (all accounts are closed) and you can’t finance anything.The differences 1) No bankruptcy on your credit report for 7 or more years.2) Completely optional. You don’t have to include every creditor and your creditors don’t have to accept any proposal. Because of this the 1st month or two can be a bit hard on the nerves.3) You can end the plan anytime. but your creditors will come demanding payment in full immediately on everything owed and don’t count on them being willing to make a deal.4) If you miss a payment on the debt management plan your creditors can (and probably will) cancel their participation if they wish.
Hi Bongumusa, this is an interesting option. I assume you are talking about your private loans as there are no credit requirements for federal loans so everyone can qualify as long as they have eligible loans. Also, since student loans dont qualify for any type of bankruptcy and are always due no matter what I am not sure what kind of debt you have. If this is none student loan debt then it makes perfect sense and I am glad you were able to get the help you needed. If you need any further assistance please contact Degrees of Success.