Consolidating College Loans: The 4 Main Plans Available
In many cases, the principal concern for students is not their studies,
but the debts incurred by at college. Between college fees and living
expenses, the loans required to simply survive can be huge. But by
consolidating college loans picked up over the course of a college
career, the weight of debt lessens considerably.
While there are many private lenders advertising this option to students
and graduates, these generally only relate to any private loans taken
out, and not the federal financial aid packages that can also be taken
on. But the good news is that there is also a range of consolidation
plans for those with federal loans.
In all, there are four consolidation plans available. All of these
options are designed to lower the overall cost of college loans, and
make repayment of the debt easier, especially for those who are still
without a reliable income. But it also includes those who are mid-career
with a significant part of their debt still to clear.
Standard Consolidation Plan
This plan is perfect for consolidating college loans for recent
graduates who already have a regular source of income, whether because
they have already started a career or have found casual work in bars,
restaurants or the retail injury.
The term of the loan plan has a limit of 10 years, making the regular
monthly payments much more affordable than the original federal
financial aid loans. The interest rate is fixed at a low rate for the
duration, so the loan plan is easy to budget for, with the payments
never changing.
Extended Payment Plan
This is ideal for those who have a lower monthly income, and face
college loans with terms that have made their debt too difficult to
manage. The terms of this consolidation plan are very similar to those
of the standard plan, but the lifetime of the loan is much longer.
At between 15 and 30 years, this plan is recommended to those graduates
facing the higher level of debt. The long term means monthly repayments
can be kept to a minimum, thereby increasing affordability even to those
on small salaries. And because the low interest rate is fixed for the
full term of the loan, budgeting is easy, making consolidating college
loans almost ideal.
Graduated Payment Plan
Designed for students who are trying to balance the pressures of study
and repaying federal financial aid, the graduated plan features a
steadily increasing repayment structure. The first repayment amount is
quite low, making it very affordable while in college. But, every two
years the sum increases to reduce the debt that bit more.
The lifetime of this option is also 15 to 30 years, so fully repaying
college loans can still take some time. The chief advantage, however, is
that the initial cost is extremely low.
Income Contingent Payment Plan
Finally, the fourth option in consolidating college loans is the income
contingent plan, which is far more complicated that any of the other
three. The monthly repayment is carefully calculated, with the income
level of the student in question only part of the equation. Also taken
into account is the income of the family of the student, and the degree
of debt they already face.
Of course, federal financial aid is only available to students who are
in need of help to pay college fees. But when the family is also in a
tight financial situation, the chances of financial relief from them is
lessened. With the fourth plan, college loans can be repaid according to
what is affordable to the individual applicant.
