Student Loan Consolidation Plans For Multiple College Loans–Are Consolidations More Affordable?

Student loan consolidation plans may be helpful for some graduates who have multiple college loans and have exited college with a sizable amount of debt. Student loans have become quite common among many students who are attending a college or university, as the costs of college have not only risen but some scholarships or grants may not meet the entirety of one's financial needs when pursuing an education.

However, consolidation plans which may be used for most college loans are not always in a graduate's best interests, and for this reason many financial aid counselors often suggest that students take a close look at their financial situation and their student loan debt to make sure they are in a position to benefit from a consolidation plan. Obviously, consolidations may be available on both federal and private loans, but these types of loans may not be mixed in some cases, meaning private student loans are typically not able to be consolidated with federal loans.

Also, there are concerns by some advisers who feel that consolidating multiple college loans could be more costly to students overall, which is something which may be avoided if alternative repayment options are explored. Understandably, some students cannot afford to meet multiple college loan debts due to financial troubles in their personal life, but they may be able to afford the payment which is required on a single student loan consolidation plan, as only one monthly payment and interest rate must be met by a graduate.

Yet, despite the fact that there are some student loans consolidation plans which offer low interest rates, students are still advised to explore repayment options which may be more beneficial. Again, if a student has a mixture of loans, like federal and private loans, consolidating may do little to help and could, again, cause an overall increase in the total amount one must repay.

On the other hand, there are students who have been able to use student loan consolidations as a way to group all of their debts into one loan, and simply meet more than the minimum monthly payment, which has allowed them to not only find the affordability they need in repaying their debt, but also lower overall costs that may be associated with a student loan consolidation plan.

For students who may be able to meet multiple debts separately, this could lower overall costs on student loans as smaller principle amounts may be easier to erase than one large consolidation sum. Yet, this option will obviously come down to a student's personal financial situation as to whether meeting debts separately is affordable versus a need for a student loan consolidation to avoid missing payments on one's student loan debts. Graduates can contact their student loan lender for alternative repayment assistance plans, like income-based repayment options available on federal student loan debt, if affordability is a problem, but again, graduates have still been urged to weigh all options when it comes to repaying their student loan debt to find the best and most affordable option for their personal situation

How to recover from debt depression

Dear Debt Adviser,
I have a few credit cards -- four bank cards, one retail card and I also have school loans. Last year I fell into a depression and completely stopped all payments. Now that I'm better, I'm trying to begin the process of paying. I just don't know where to begin. Theminimum payments are so high and I've tried to pay but the interest at this point is so high it doesn't seem to make any difference if I pay. Please help. What can I do? 
-- Ruth

Dear Ruth,
Depression is a terrible affliction that can immobilize the best of us. Overcoming it is no easy matter, so I am glad to hear that you are feeling better and are up to tackling your debt. Over the years I have worked with a large number of individuals and families who found it overwhelming and hard to know what to do after having stopped making payments on credit cards and other obligations for an extended period of time.

Certainly, you could try to contact each of your creditors and work out a payment plan that fits your budget. My experience is that your odds of success go down as the number of creditors increases. It only takes one unsympathetic or aggressive collector to derail your best efforts. Fortunately for you and others in your situation, quality, dependable help is available from a nonprofit credit counseling agency.

What I would encourage you to do is visit either the National Foundation for Credit Counseling orAssociation of Independent Consumer Credit Counseling Agencies and find a credit counseling organization you feel comfortable working with. The members of these associations must meet strict quality standards for dealing with vulnerable consumers. You can expect that any of the member credit counseling agencies will give you good advice and assist you in getting started with a workable repayment plan you can afford.

The first thing I suggest you do is to gather all your monthly billing statements, including bank card statements, retail card statements, student loan statements as well as your monthly rent/mortgage, utility bills, grocery bills for the month and any other expenses. In addition, you'll need a copy of your paycheck stub and any other income sources. This information is what your counselor will need to have in order to come up with a solution that fits your situation.

To get your interest rates under control and give you a manageable payment that you can afford, I believe you might benefit from a debt management plan, or DMP. For accounts placed on a debt management plan, many major creditors will deeply discount or eliminate fees, penalties and even interest. Others may accept a less than full balance repayment plan. Under a debt management plan you will need to temporarily swear off using consumer credit (because your accounts will be closed) and agree to make one monthly payment to the credit counseling agency for the agency to disperse to your creditors.

Although the credit counselors should be able to help you with most of your creditors, expect that you will have to deal with your student loan providers yourself. Your counselor may be able to help you identify any student loan workout, deferral or forgiveness options that are available and that you may be able to use once you get your financial feet back on the ground.

Many people I have worked with become distracted by looking at their credit score. Because you have not made payments in quite some time, your credit score will have dropped dramatically. I suggest that you focus on getting your debts under control and paid off. Do not worry about your credit score at this point. It is bad and it may get worse before it gets better. However, if you put your accounts on a debt management plan and make on-time payments for several consecutive months, your accounts can be re-aged (industry term for the creditor reporting to the bureau your account as current and paid on time), which should improve your credit over time.

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Applying for a Student Loan Consolidation

It is that time of the year again where students will be going into higher education and to college. If you are one of these students that are currently sorting out your college plans, you should know that the cost of higher education has shot up in the past few years. This will leave you needing to find finance for your education and although there are a number of different things you can do in order to finance your education, a student loan is one of the best ideas.

For recent graduates, making use of the student load consolidation option might be great idea. The Higher Education Act actually makes student loan consolidation assistance available with the Federal Family Education Loan Program as well as with the Direct Loan Program.

Using these types of programs, your education load can actually be repaid and a new student loan consolidation will be generated. This makes it a lot easier for you to manage the repayments of your loans as they will now be consolidated into one easy to manage loan. The interest rate is generally much lower and this makes the loan much more affaordable.  It is certainly worth considering.