Student Loan Consolidation Info – How To Reduce Student Loan Payments
You may be able to repay student loan debts with grace periods, government consolidation loans or forgiving options. Refinancing options allow borrowers to combine existing federal and private student loan debts into one loan. With refinancing, the borrower no longer has to pay interest on any of the private student loans that are consolidated. Government consolidation programs combine federal education loans into one. You can repay student loans by consolidating federal education loans or forgiving federal education loans. Either option enables borrowers to reduce their monthly student loan repayments by extending repayment terms.
It is important to note that there is more than one method for getting out of high interest student debt. Forgiving federal education loans and repaying private education loans with affordable repayment terms are often the best solution. Getting a federal loan is fast and easy but there are also different repayment plans available to borrowers. Therefore, borrowers must consider the pros and cons of each option and select the right one that suits their needs and budget.
With forgive the debt plans, borrowers have to first qualify for them. Qualification requirements vary from plan to plan but typically requires that borrowers have not been delinquent on their loans for at least five continuous months and have not been granted forbearance on federal student loans during the last two years. Borrowers must also show proof of their ability to repay the new, lower monthly student loan debt and prove they are financially able to make the modified monthly payments.
The other option in federal government forgiveness plans is to consolidate existing federal education loans. Repayment programs allow students who have several outstanding loans to put all their loans into one loan with a single payment. To do this, borrowers must choose a repayment plan from the government’s standard, graduated payment plan. The graduated payment plan allows borrowers to start out with lower payments and gradually pay more money per month as their debt is reduced. However, borrowers must be prepared to make larger monthly payments if they choose the standard repayment plan.
There are also two other types of financial hardship programs available to borrowers. One type of program allows borrowers to reduce their payments based on their income-driven repayment option. This option requires borrowers to choose a payment amount based on their income. Another type of program requires borrowers to choose the standard repayment plan and then reduce their monthly payments by a percentage of their income. Under the income-driven repayment option, borrowers have to prove that their income has changed in order to reduce their monthly payments.
Deferment policies allow borrowers to temporarily stop making payments on loans. This is a good option when the borrower is caught in a financial hardship situation. Although the borrower has the opportunity to pay his or her loans early, the penalties for deferred payments can be quite large. Borrowers should be sure that they are eligible for the deferment before taking advantage of it.
Ten years after graduation, graduates are required to begin paying their loans according to their revised graduate repayment plan. Under the revised plan, borrowers are required to make a single payment each month for the entire duration of the ten years. Those with good credit may be able to pay lower student loan payments thanks to a longer grace period.
In addition to lowering your monthly payment, you can lower your interest rate as well. Interest rates at banks are tied to the credit rating of the borrower. Lowering your credit rating can increase your chances of qualifying for a lower interest rate. If you have sufficient equity in your home, you may also qualify for a home equity loan. Interested borrowers can find many programs available to reduce student loans.