It definitely came out as a bit of a shock when a public research showed that the student loan debt has exceeded the credit card debt in the United States. Things got even scarier when student loan debt in the country surpassed $1,000,000,000 for the first time ever. The truth is that the numbers just keep growing. According to the Federal Reserve, Americans citizens have more than $1.4,000,000,000 in unpaid debt from student loans.
While all of this is going on, there are many American families with kids ready for college doing everything they can to avoid going into debt with the following means:
- Apply for a scholarship
- Save as much of your money as you can
- Go to a cheaper college
While the above can have a certain positive impact on your financial situation, none of these can really change the reality that the costs for education have far outpaced the wage growth.
If you can somehow find a way to pay for your college education without taking out a student loan, you should totally do it. In fact, you should do everything within your capability to avoid taking out such loan. A student loan debt can have a very negative impact on the state of your credit score as well as on your overall financial future.
There are certainly some things that you are able to do. One of these things is to check the costs using the net price calculator of the educational institution you are interested in. That calculator should be on the institution’s website. Check it out to see the amount of money that a student like you would have to pay after scholarships and grants. Another thing that you may want to do is to check out the amount of student loan debt which some recent graduates have ended up with.
Where is the lowest debt from student loans?
In 2015, 68% of the bachelor’s degree recipients have graduated with certain amounts of student loan debt. The average amount was about $30,000 per person. TICAS organization has put together a project that is based on the data of student debt loan numbers called the ‘common data set’. That is basically a survey of different colleges used by various college guide publishers. In this process, the colleges are voluntarily self-reporting their data, which presents some problems.
That is because, colleges are accurately calculating and reporting their debt figures each year have all the right to complain about how there may be other colleges that have some students with a higher average debt amount. However, they do not update their debt figures and do not report their actual debt levels, or even never send any reports at all.
Student loan debt in the different states
So, for students who have earned a bachelor’s degree in 2016, the TICAS has determined the average student loan debt for each state in the United States by using data reports from more than 1,000 colleges from across the country. In the United States, there are more than 3,000 four-year educational institutions. Other than that, the data reports were actually limited only to bachelor’s degree recipients. That means that the students who had debt but did not actually have a degree were not included in the data reports. Also, if a student has taken out a student loan at a different school prior to transferring to the college where he has graduated, these number were also not included in the data totals.
How to get out of your student loan debts?
There are different ways that a person can get rid off his debts and each person’s situation is different and unique, therefore the solutions to his specific problems may vary. However, when you are carrying multiple student loan debts, probably the most commonly used method for dealing with such debts is with a student loan debt consolidation.
What is student loan debt consolidation?
Like most debt consolidation types, student loan debt consolidation loan is designed to help get rid of their multiple student loans by combining all current student loan debts into a brand new, larger student debt consolidation loan that normally has new, better loan terms than the the overall combination of your current student loan terms. That includes a new interest rate. There are two main options to consider when deciding to use student loan debt consolidation. You can either consolidate your multiple student loan debts with a Federal student debt consolidation loan, or you can consolidate your student loan debts with a student debt consolidation loan from a private loan lending company.
Federal student loan consolidation
Federal student debt consolidation loans are for, as you might have already guessed, federal student loans. By using the direct loan consolidation program, you are able to consolidate almost every federal student loan. You can’t, however, include any of your loans from private loan lending companies, and you also are not allowed to include any loans that have borrowed by your family on your behalf. You are free to consolidate your federal loans whenever you feel like it after you graduate from your college, after you leave it, or if you drop below the half-time enrollment. You would also normally not need to go through a check on your credit score in order to consolidate your federal loans. Federal student consolidation loan’s interest rate is fixed for the whole life of the loan. However, it normally varies from one person to another. That is simply because the interest rate for your federal student debt consolidation loan is based on the interest rate of all the student loans that you are going to be consolidating. That means that you will have to pay the weighted average of all these rates.
Student loan debt consolidation from a private loan lending company
There are many different private loan lending companies that also offer student debt consolidation loans. Some of these loan lenders may even allow you to include some of your federal student loans in your private student debt consolidation loan. However, if you do not have a strong or long credit history, something that the majority of students and recent graduates do not have, you may not be able to qualify for a private student debt consolidation loan, or you may be required to get yourself a cosigner who has better credit in order to secure better loan terms for the loan, including a lower interest rate. When you are taking out a private student debt consolidation loan, you may have a loan with a fixed interest rate or you may get a loan with a variable interest rate.
- While getting a student debt consolidation loan with a variable interest rate might mean that you will have a lower interest rate from the start, that interest rate may change and increase with time, and you can end up paying more than you would with a higher, but fixed interest rate.
- In the case with fixed interest rates, you will get a higher interest rate on your student debt consolidation loan from the very beginning. However, that rate will remain the same for the whole period of the loan repayments. Which means that there will be no chance for it to increase and so you will be able to calculate your costs from early on.
How will consolidating your student loan debts with a student debt consolidation loan affect your credit score?
Like almost any financial decision that you have made or will make in the future, consolidating your student loans with a student debt consolidation loan is going to have an affect on your credit score. However, that effect is not going to be significant enough to play a major role in your decision making. Consolidating your student loans have every potential to help you make your loan repayments on time since you would be able to focus only on a single monthly payment instead of having to juggle multiple loan repayments each month. And as you may know, if you stay on top of all your payments and you are doing that each month, it will eventually have an impact on your credit score. That impact will be positive because it will show the creditors that you are a reliable borrower, a borrower who takes his loan repayments very seriously.