College Consolidation Loans – You Could Be Paying Too Much For Your Education; After You’ve Been to College

How many new college graduates enter the world saddled with debt? According to some recent stats on the subject, college loans are a fact of life for most students leaving school. In the decade between 1993 and 2003, student loan debt increased 137%, and that’s adjusted for inflation! According to a study of student loans and debt by Pew Research done in 2005, the average level of debt carried by a college student upon graduation was all over the map, and varied by a number of factors, including the state where they attended college, the college they attended, and the level of education they achieved.
The study had some interesting conclusions; to wit – There isn’t a correlation between the state’s cost of living and the level of debt carried by students when they graduate. In addition, North Dakota, a state with a fairly low cost of living was number 3 in the level of student debt. Iowa, another state with a low cost of living, ended up in the number 2 spot on the list of indebted students.
You’d think that going to a state school would be less expensive and help avoid graduating with a boat load of debt, but no, that’s not always how it works. In some states, North Dakota and Iowa among them, but also Kentucky, Delaware and Tennessee, you could easily end up with greater levels of debt than those who attended private schools, according to researchers.
There is also not a direct correlation between the cost of tuition at a college or university and the debt level of its graduates. Some schools with very high tuition had relatively low levels of debt among graduates. That could be because a large number of students attend the private schools on scholarships and thus pay no tuition, or because they come from relatively wealthy families that could afford to foot most or all of the bill for the student’s education out of their own pocket. In addition, some schools and states with high tuition costs have better financial aid programs to offset some or all of the student’s costs.
Student loan provider Nellie Mae reports that the average undergraduate debt upon graduation is now up to $27,600. If you’re one of these students with crushing student loan obligations what can you do? You can just gut it out and pay off your loans, or you can default and leave your lender hanging. Okay, so you’re probably trying to avoid the second choice in this scenario. The fact remains though, that high levels of student debt can set you back substantially when it comes to building a solid retirement account, buying a home or, ironically, setting up a college account for your own kids.
One way to reduce your loan payments is to consolidate your student loans. Much like any other loan consolidation program, a student loan consolidation program allows you to use a single, large loan to pay off many smaller loans, in theory at a lower interest rate. As with consolidation loans for other types of debt, such as credit cards, you’ll substantially reduce your monthly payment by doing so. You’ll also make your life more convenient by paying a single loan, instead of a myriad of smaller ones.
The major difference between consolidating a student loan and your credit card debt is that you won’t have to put your house on the line when you consolidate a student loan, as you would with credit card debt. This holds true for federally insured student loans, but typically is not the case if you got a personal loan to help pay for your education.
There are some huge benefits to student loan consolidation, such as dramatically reduced monthly payments, but it’s a little different than rolling your credit cards into a single loan. When consolidating student loans, you have a deadline for application each year. In the last few years there have been several changes by the U.S. Department of Education regarding how you proceed with consolidation.
Student loan interest rates are determined by the 91-day T-bill auction. To receive the current year’s rates, and this is important, your completed consolidation loan application must be received by the lender, and they have to confirm the loan before July 1st. If the loan isn’t approved by July 1st, you’ll pay the following year’s rates. In years gone by, there was a grace period that would allow people to skate in past the deadline as long as their complemented application was in the lender’s hands. Now they must have completely processed the loan request and approved the loan by the deadline. You can thank the 109th Congress for that.
Unlike your credit cards, you should almost always consolidate your school loans, if they are federally insured and you can drop the aggregate interest rate. Another difference is that you won’t have to submit to much of the documentation required with other types of loans, such as credit checks or any other such nonsense. Your school's financial aid office can be a big help with your consolidation efforts. One last thing; verify if your lender will give you an interest rate reduction on your consolidation loan if you have your payment automatically withdrawn from your checking account.