Student Loan Debt

Consolidating your debt can help ease your stress and burden.

Make your student loan debt more manageable

Celebrate your college days with a smart loan-repayment plan:

Congratulations! You finally did it! The four years (or more) of hard work are over and that framed diploma hangs now proudly on the wall. Hopefully you have secured a job in your desired field and you are ready to take on the world. But if you are like nearly 44 million other Americans, you have outstanding student loans. So, consider this final college assignment to take care of: paying off that student loan debt.

Skyrocketing college debt has been called a national crisis. According to the Federal Reserve, the average student loan debt for the Class of 2017 is about $37,000. In fact, American’s owe more than $1.4 trillion in student debt, paying an average of $351 per month between ages 20 and 30. And, the Wall Street Journal reported that more than 40% of those with certain government loans are behind on payments.

Some advocates are lobbying for expanded student debt relief programs, but it’s unclear whether the government will take action. For now, one option is to consolidate your college debt into one loan, which could provide a number of money and time-saving benefits. At Coastal Credit Union, we offer several loan options that can help college graduates achieve these goals.

Exploring the Types of Student Loans

There are several types of student loans so it’s important to explore each type. The primary federal government loan is the Stafford Loan. Between 2006 and 2016, Stafford’s interest rate for undergraduate loans dropped from about 6.8% to 3.76%. Another common federal loan is the Perkins Loan, designed for students with extreme financial need. These, too, have a fixed interest rate of 5%.

Private lenders also provide billions of dollars in student loans. These loans often carry higher interest rates, some above 10%. Some have variable interest rates, meaning the rates can change with economic conditions. And some have shorter repayment schedules than the federal loans. Like most loans, the better the borrower’s credit, the lower the interest rate.

Consolidation Factors to Consider

If your debt consists solely of federal loans with fixed interest rates, you may want to consider the government’s Direct Consolidation Loan program. Among other advantages, borrowers continue to qualify for some terms of the original loans. For example, initial loan payments can be deferred for a certain time period after graduation. And some graduates qualify for lower monthly payments thanks to guidelines that link payments to income levels.

So who might benefit from loan consolidation through Coastal? Graduates with somewhat older loans that carry higher interest rates. Borrowers with variable interest loans whose rates can change unexpectedly. And those with a combination of private and federal education loans or with private loans only.

Benefits of Student Loan Consolidation

First, you should make sure student debt consolidation makes financial sense for you by making use of our Debt Consolidation Calculator. Also, as with any loan, you should research interest rates and other loan fees. In general, however, these are the advantages of education loan consolidation:

  • Lock in rates: Interest rates have been hovering near historic lows. It’s possible they have dropped since you obtained your student loans so do your research. Consolidation allows you to take advantage of those lower rates. Also, replacing variable-rate loans with a fixed-interest loan eliminates the risk of a future interest rate jump.
  • Lower payments: The repayment period for most student loans is five to twenty years. Through consolidation, you may be able to extend the repayment period and thus reduce your monthly payment.
  • Increased flexibility: Some private loans allow you to tailor your monthly payments to your current income, or to gradually increase your payments over time. These may be attractive options if you have an entry-level salary but foresee more lucrative compensation as your career progresses.
  • Logistical ease: Many graduates have multiple student loans with several debt service companies handling them. By consolidating these loans with Coastal, you can make one simple monthly payment and easily track how much you still owe.

Student Debt Forgiveness Act

You may recall that the federal government approved a student debt forgiveness act under President Barack Obama. The law does allow for those flexible repayment schedules based on incomes. But, actual student loan forgiveness is quite rare. Graduates who pursue public service careers can have their loans forgiven after ten years of payments. And, low wage earners who make payments for twenty years may have the remainder of their debt forgiven.

So the truth is that most college graduates must repay every borrowed dollar. And if you have to owe money to someone, it’s smart to spend a bit of time determining the smartest way to approach student loan debt repayment. To explore what might be right for you, contact us and find out if consolidating your student loans might make the repayment process a little less painful.

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