Student Loan Debt Consolidation
Student loan debt consolidation is common, even among people who have no financial issues. The fact is, student loan debt is often way too high for the average graduate, an entry level employee, to pay down during the standard 5-10 year repayment period.
For the 2007-2008 year, 58.8% of all undergraduate students took out student loans to help pay for school. Cumulative debt during that year averaged around $18,625.00 . The numbers are much higher for graduate students. The median additional borrowed amount for graduate students was $25,000 for Masters’ degrees, $52,000 for doctoral degrees, and just under $80,000 for professional degrees (www.finaid.org). As we can see, the amount of debt carried by graduating students is substantial.
Interest rates at this writing were 6.8% for federal Stafford loans and 7.9% for PLUS loans (www.finaid.org). Private loans are even higher. A graduate leaving school with $50,000 in student loan debt at a 7% average interest will pay approximately $580.00 a month for 10 years. A student with an advanced professional degree and $100,000 in student loan debt at a 7% average interest rate will pay approximately $1,161.00 a month for 10 years.
Typically a consolidated student loan’s interest rate will be the weighted average of the loans that go into it, rounded up to the nearest 1/8th percent. The benefit is the extended term. This lowers your monthly payment substantially (www.finaid.org). There are typically multiple types of repayment plans including standard 10 year repayment, extended 20 and 30 year repayment, and various graduated plans, allowing for lower payments initially, gradually increasing every couple of years.
When working on your financial planning and budget management, student loan debt consolidation should always be a serious consideration. They tend to be the easiest to consolidate because it is so common for students to do this. The monthly savings provided by the longer term can be substantial and help your cash flow situation considerably.
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