Advanced degrees often come bundled with
advanced levels of student loan debt. Students may be tempted to stay in school
beyond their undergraduate degree as a way to keep from paying off their first
student loans, but the debt keeps growing as their education continues. Soon
enough, graduate school is over, graduation day comes and goes, and there you
are with considerable debt and desperate for a job.
Lucky grads who come out earning decent
salaries are typically among the set wooed by top engineering and tech
companies, or those with which they’ve done internships. But if you are like
most grad students, you have been in school for many years and have little real
world experience. Graduate students may seem well positioned in the working
world for their academic qualifications, but in many cases they are actually
just as lacking in practical experience as undergrads – but in more
debt.graduate consolidation loans
You are sent out into the world to fend for
yourself, and make the best of the standard six-month grace period that goes by
all too quickly. Then loan repayment begins. Monthly payments seem like a given
at this point, but if they could be lowered, or even cut in half, they would be
feasible. Luckily, consolidation is an option that can make this a reality.
Though it stretches your loan payments out over a longer time, it does make
them more affordable and less stressful, so in some situations is the best
decision to make.
Graduate Loans Mount Up
At the minimum, your graduate student loans
probably include a number of federal loans such as the Stafford Loans and
Graduate PLUS Loans. Where federal loans, scholarships, fellowships and grants
have fallen short, you may have chosen to supplement the costs of college with
private or alternative loans and now have those to pay off, as well.
There are a number of scenarios that put
graduate students drowning in debt at this point. Undergraduates that migrated
directly into a grad school program would never have become eligible to begin
repayment of their undergraduate student loans. These old debts must now be
paid off.
Undergrads that took time away from college
and started a career and/or family before they went back for a graduate degree
might have been interrupted in their student loan repayment. These borrowers
have undergraduate loans probably suspended in deferment, and new graduate
loans in addition.
What are your options now? Depending on your
financial circumstances and success in getting a job directly after graduation,
you may wish to consider total loan consolidation. This process will extend
your payments over a longer time, but it will cut them down sometimes to half
of what they would be. These smaller, more manageable payments can make a world
of difference when you are just getting started on your financial career.
Factors to Consider Before Consolidation
Regardless of the repayment situation,
graduates struggling to juggle monthly payments must consider consolidation an
option. Before you commit to consolidate, ask yourself these questions to
determine if it is a wise choice:
How many loans do you have? Federal? Private?
Where in your repayment are you? Within grace
period?
Are any loans in default?
How many lenders do you have?
Are your monthly payments difficult to manage?
Do you have other monthly financial
responsibilities?
Consider your situation carefully. Would you
rather budget and save and pay your loans off as fast as possible, no matter
what? Or would you rather pay what you can now, and keep paying smaller amounts
until everything is taken care of?
Available Consolidation Programs for Graduate
Students
For many working adults, especially those with
families and other financial responsibilities like homes and cars, student loan
consolidation could be a godsend. If you decide that consolidation is the best
route for you to go, the best advice is to first consult one of your lenders
for guidance and a good consolidation plan. Lenders for the federal loan
program include the federal government’s Direct Loan Program or a Federal
Family Education Loan Program (FFELP) lender, such as the very well known
Sallie Mae. More information on Direct Loan Consolidation can be found here.
Federal Loan Consolidation for Graduates
Federal loans stemming from both undergraduate
and graduate programs may be consolidated under the Federal Loan Consolidation
Program. The interest rates are fixed and determined on a “weighted average” of
loan interest rates and capped at 8.25. If your current loans are variable,
this stability could be very advantageous. Loans within the six-month grace
period may also qualify for lower interest rates. You may consolidate through
the Federal Government’s Direct Consolidation Loans Program if you have a
subsidized and/or unsubsidized Stafford Loan to include in the process.
Consolidation of your federal loans through a
FFELP lender are best compared for their borrower benefits, the only freedom
most lenders have with the federal family of loans. However, most lenders will
not qualify defaulted loans under their FFEL consolidation programs. Your FFEL
lender is positioned to offer you their best deals and guidance in
consolidating your graduate federal loans. Also FFEL consolidation loans are
exempt from credit checks. Also, because timing matters (see below), make sure
your lender allows you a grace period in which to add another loan. This may be
very useful in the long run as you get closer to paying off your debt entirely.
Private Loan Consolidation for Graduates
Private student loans for graduate students have
grown in popularity over the last five years both on their own and as a way to
fill in the gaps in cost that federal loans and grants/scholarships do not
cover. If you are like many other students, you may have gotten a private loan
to finance the remainder of outstanding college tuition at the graduate level
once your federal loans were expended. Or you may have borrowed from the
popular crop of lenders offering specialty-specific graduate loans that target
the more costly college programs, such as law school, medical school, and
business school.
Private graduate loan consolidation, unlike
federal, typically requires you to have good credit or apply with a
creditworthy co-borrower. Lenders have a lot of flexibility with their private
loan products, versus the federal consolidation program. You will find lenders,
such as Sallie Mae, that require a minimum in loan balances; and those, such as
Bank of America, that are willing to bundle auxiliary educational loans like
those used for textbooks and computers, into the private loan consolidation.
Check with your lender to see what incentives and packages they may have to
offer those wishing to consolidate. You have the freedom to do some shopping
around in this regard, as the terms are often much more variable than in
federal loans.
All About the Timing
Once students reach the graduate level in
school, associated loans come bundled with different terms that make timing key
in the acquisition of those loans. For example, federal loans originating prior
to July 1 2006 feature variable interest rates and those change each July 1.
These seemingly small differences enable the timing of a loan consolidation to
make all the difference in the world. In another example, Grad PLUS Loans for
Graduates and Professionals are eligible for consolidation as soon as they are
disbursed to the college or university, in contrast to Stafford Loans that may
only be consolidated after graduation. This may offer you a timing advantage,
but so much relies upon your other loans that you are best advised to check
with your lender as soon as possible for the best consolidation plan for you.
Remember to keep a level head and only commit
to repayment options that fit into your budget, lifestyle, and financial
circumstances. With the variety of different lenders, length of time to pay,
payment amounts, and interest rates, there is certainly a suitable plan
specific to you that will enable you to pay off your debts and simultaneously
be able to enjoy your graduate degree and career.
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