The Benefits Of A Direct Student Loan Consolidation

Many of us get a student loan because we are not able to pay for the degree we worked so hard for.  Everything is great while you’re going to school, since you don’t have to pay anything back to the loan company and it feels like you’re getting an education for free.  The problem comes, however, right after you graduate when you need to start making monthly payments for your loan.

If paying back your student loans is risking your finances or affecting your credit rating negatively, then you might want to consider a direct student loan consolidation.

A direct student loan consolidation offers several benefits.  One of the good things about a direct student loan consolidation is that you will able to exchange all your higher interest rates student loans for one with a more convenient, fixed interest rate.  If you ran out of options for forbearance or determent because repaying your loan doesn’t fit your budget, or if you think you are about to default on your payment, a direct student loan consolidation can signify a much better solution.  Usually, a new loan means a fresh beneficial start.

With direct student loan consolidation, you will get a much lower interest rate.  Sometimes, interest rate goes as low as 0.6 percentage points.  This, of course, will mean that your monthly payments will drop.  Also, another advantage about consolidating your loans is that it will show on your credit report as if is already paid off, and your credit score will actually improve as a result.

Plans For Repaying A Direct Student Loan Consolidation

When repaying a direct student loan consolidation, there are four plans you will need to examine carefully before considering what your best fit is.

• The first plan you have to consider is a Standard Repayment Plan which will provide you with a fixed monthly payment for up to 10 years.   

• You will also have the option of an Extended Repayment Plan.  This plan will give you also a fixed monthly payment, but it is extended between twelve to thirty years, depending on the borrowed loan amount.  Keep in mind that extending your loan period will reduce your monthly payments, but in the long run you will end up paying more. 

• The third plan is the Graduated Repayment Plan.  This type of plan also offers a repayment period between 12 and 30 years, however, your monthly payment will increase every 2 years. 

• Another plan is the Income Contingent Repayment Plan.  With this plan, a monthly payment is calculated based on your annual gross income, family size, and total direct student loan debt, and extends those payments over twenty five years. 

In conclusion, a direct student loan consolidation may be better for you if you are close to paying off your loans, but in the long run it may not be worth it to extend your payments because you will end up paying more interest money.