Obama Allows Students to Consolidate Student Loans
Today’s students are faced with a bad economy upon graduation. Many students are finding it hard to find a job, especially in their chosen field of study. It is not uncommon for students to also have a number of student loans to pay each month, making it even more difficult to meet all of their financial obligations. One solution is to consolidate student loans into one payment, thus lowering your monthly payments and making it possible to gain a better grasp of your finances.
President Obama announced an initiative on October 25th to accelerate changes to the Income-Based Repayment program passed by Congress in 2010. New changes will allow borrowers to only pay 10% of discretionary income and be able to shorten the time period from 25 to 20 years. The plan is to go into effect in January 2012. The plan will also allow students to consolidate multiple loans into one.
What are Consolidation Loans?
Consolidation loans are one approach to debt that can be very effective. Many students make a number of payments each month. With several payments, it can be difficult to manage the monthly budget. Getting various payments in on time and avoiding late payment fees can be challenging. Late or missed payments can result in negative reporting on your credit report.
By using a consolidation loan, students are able to roll all of their student loans into one payment, making it easier to keep track of their monthly payments and avoid late payment penalties. Often, consolidation loans are financed over a long period of time and have extremely attractive interest rates.
Other Types of Consolidation Loans
The concept of consolidation loans is not a new one. Currently, credit card debt consolidation loans are extremely popular. Similar to student loan consolidation loans, the lender turns around and makes the payments to all of the creditors as part of the process.
The advantage of credit card consolidation loans is that they are a way to reduce your overall credit obligation because they are usually at much lower interest rates than those typically charged by credit card companies. Also, because they are financed over a long period of time, credit card consolidation loans result in lower monthly payments overall. This translates into better budget management for consumers.
Regardless of what kind of consolidation loan you need to manage your debt, there are numerous options available to you. Student loans are of particular concern because once you have a student loan you are obligated to make payments until it is completely paid off. Unlike other types of debt, it cannot be eliminated through bankruptcy or debt settlement negotiations. As a result, many students find that they need to consolidate their loans in order to be able to manage their payments more effectively.