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When a student has graduated and been thrust into the job market, the prospect of having a student loan payment due every month can put a real dent into ones lifestyle. Entry-level jobs after graduation often do not pay much and that is when new responsibilities begin.

Graduates leave a life style of paying a small amount for rent and food and begin looking for homes, clothes for a new job, cars for that job and other necessary requirements to begin their new life, and of course, repayment for that school loan.

This is when many people make poor decisions and get into trouble affecting their present and future. Some former students after a while, are faced with defaulting on their student loans, others take out more and more credit cards or loans to keep going.

What students should remember is that they need to start out very slow and live similar as to college life until their wages increase to the point where they can add to their new after college-life-style.

Student loan Consolidation is something former students might have to look into where all loans are consolidated into one, with a lower payment, extended over a longer period of time, yet more interest will be paid out. However, this would help preserve ones credit until wages increase and life is more settled.

How Poor Credit History Affects Your Life

As you grow older and need help with a loan the first issue any loan office will examine is the FICO score. The FICO is a total score calculated by the main credit agencies based how late payments were made such as 30 days, 60 days or longer. Also, the amount of credit available, the number of credit inquiries and other factors are all added up. A default payment on a secret proprietary formula, though the exact equation is not public, multiple criteria are well known and even obvious.

FICO scores are calculated mostly on debt defaults and the amount of late repayments. Both of these are counted very heavily against you. Next is the number of personal credit inquiries, which are counted against you but less.

A range of students will not have much of a FICO after college, unless they overused credit cards. It most likely starts when repayment of student loans begins. That is why it is important to start out from the beginning establishing a good credit record.

This is where the importance of repaying your student loans on time, on a regular basis is so important. A negative history of the above is evidence of a poor credit risk in the minds of the lenders.

Also, staying within your available credit limits, avoiding over limit and other costs shows a disposition to defer current gratification and take responsibility. Creditors are judging not just numbers but also character as well in any decision.

Meet all of your credit obligations and keeping all borrowing to a modest level for a period of time makes you look like a very good risk to loan officers. This means funding any student loan will be that much easier. Keep this in mind when considering any student loan consolidation.

What Is Student Loan Consolidation?

Consolidating your loans can be very confusing. There are many questions you need to ask and to have answered before proceeding with this endeavor. In a lump sum it can sound terrific, yet you need to know more about the full puzzle to be sure.

Loan consolidation is when one vendor, who opens a new loan, pays off several different loans. This new loan allows you to pay just one bill instead of several different loans, maybe from several different lenders. There are benefits to consolidating debt, but there can be drawbacks also.

Depending on your own situation, you will need to discover whether consolidating loans or keeping loans separate is the best for you. Indeed it is great to have the benefit of paying one monthly bill and knowing that your debt is through one financial lender.

The monthly payment is usually much lower on consolidated loans than individual loans. They will take all of your loans, refigure them as a new loan package and then you will be offered different options on how fast you want to pay them back.

The flip side of this is that if you have private lenders for your loans, you will not be able to consolidate your loans through federal consolidation. There are some private consolidation lenders you may want to look into. Keep in mind that they are not held to the same regulations that federal loan consolidation programs are by law.

How To Consolidate Your Student Loans

To consolidate your loans, log on to FinAid for an extensive listing of banks that can provide information, and set up, your consolidated loans. You will need to fill out a little information on yourself and then the financial institution of your choice will handle the rest of the work. Make sure all of your information and records are accurate.

You may only consolidate once, so if rates do go down you will be stuck with your current rate. However, with loan consolidation you generally get a lower fixed rate for your consolidated loans than on individual loans. A fixed rate means that they won’t increase your rate later on as inflation rises. This works in your favor, since rates tend to increase as time goes on.

Tips You Should Know Before Loan Consolidation

Students should only consolidate variable rate loans (for example, Stafford Loans), not fixed-rate loans like Perkins loans. Because Perkins loans are fixed rate, there is no financial benefit and you may lose some loan forgiveness provisions.

Student loan consolidation programs are not the same among lenders, with varying interest rates, grace periods, penalties for late payments, time for loan repayment, and other incentive and discounts. So, it’s best to shop around!

Although consolidation lowers monthly payments, it also means more interest will be accrued over the life of the loan and significantly increase the loans total cost. To best reap the benefits of consolidation, try to make the same monthly payments and pay the loan ahead of time.

To lower total interest rates and cost of your loan, you may not want to consolidate all of your student loans (for example, you may choose to include only unsubsidized loans or exclude a high interest loan with a low balance.) Check with your lender which options would be best for you.

How To Define School Loan Consolidation

Everyone describes the act of consolidating school loans slightly differently. Some say consolidation cuts your monthly payments. Others prefer the interest rate decrease after 36 months more useful. Finally, others enjoy only paying one bill each month.

Regardless of your preference, school loan consolidation encompasses all of the above, and can almost certainly assist you with either multiple federal loans or private loans.

Looking at federal loan consolidation, this is a fixed-rate refinancing program that combines all of your existing federal loans into one new loan. Examples of potential loans you can consolidate include Stafford, Parent PLUS, Perkins, and Direct. In terms of saving money, school loan consolidation can lower monthly payments up to 53%.

Alternatively, private student loan consolidation is a separate program for refinancing all non-federal school related debt. This method of consolidation offers the convenience of single, lower monthly payment for an individual’s private loans.

Federal Student Loan Consolidation

Legislative has recently (7/1/06) been passed regarding federal loans. In-school consolidation is no longer an option. You will need to be out of school to be eligible to consolidate. Next, you’re no longer required to have multiple lenders. And, you are no longer able to consolidate your loans with your spouses’ loans.

A federal consolidation loan is a governmentally ‘set’ term and will be the same regardless of who your lender is. Many people consolidate with the government because they assume they will have more ‘benefits’ than other programs. The reality is that the benefits of the loan will be the same regardless of whom the loan is through.

The primary conclusion, or the “financially smart” option is not going to be the same for each student. It is a factor of how you plan to repay your debt and what is most important to you at this time in life. It also depends on where you live. Consider all options, most states offer many different types of consolidation programs. Here are some examples:

Quick Repayment (1-3 years)

• .25% interest rate reduction for auto pay

• 5% principal balance credit

Extended (beyond 8 years)

• .25% interest rate reduction for auto pay

• 2.25% reduction after 48 on-time payments

Intermediate Repayment (3-8 years)

• .50% reduction for auto pay

• 1.25% reduction after 48 on-time payments

Private Loan Consolidation

As with federal loan consolidation, we must first look at the changes and considerations for private loan consolidation. First, you cannot consolidate private loans until you’re out of school and beginning repayment. Next, you cannot consolidate private loans with federal loans.

And unlike federal consolidations, in the vast majority of instances, consolidation private loans will leave you with a variable rate loan, not a fixed interest rate. Remember after checking all of your options, keep in mind that the best option is often to leave your loans alone.

As mentioned, there are only a few companies that don’t have stipulations in order for you to use their consolidation refinance program. You will want to shop closely the loan rates and terms because the lender, not the government sets the interest rates (most are linked to the Prime Rate.)

Perhaps the most important question to ask is “how is your credit now”? And what did it look like when you first took out your loan? Private loans are credit-based and if in any way you have had problems along the way you should reconsider.

Also, remember most companies will assess fees to consolidate, along with maintaining a variable rate, even if your credit has not dropped. It can be a difficult decision and only you can decide after knowing your financial situation if consolidation will lift that burden or increase that burden.

There are some ways that you could potentially cut down on your student loans even before you leave school which many students do not even take the time to consider while they are pounding the books for A’s. It might require you to be creative with your student loan and how you handle your payments.

Don’t Be A Lemming With Debt

According to a study given by the National Post-Secondary Financial study the results showed that nearly two-thirds of college students struggle to pay loans and they unfortunately graduate with a bachelor’s degree and student loan debt of some kind. For undergraduates with federal student loans the average debt is nearly $20,000 coming out of school.

That is a lot of money that could buy you a nice new car or maybe a down payment on a house. Even after you find a student loan opportunity and even if you take it be willing to look for other opportunities out there for loan consolidation. There are going to be times during your 4 years at school where a better deal may pop up and give you better rates and easier payments.

Study For The Right Debt

There are plenty of private and non-profit student loans out there that are willing to offer loan consolidation that could save your skin when it comes to a loan. Many federal student loans have to deal with increasing interest rates. That translates only to more money coming out of the student’s pocket and more payments long term.

The last thing you want to do is worry about more bills along with utilities, rent or a mortgage, car payments, saving for a family of your own, and countless other things that come up. I studied my bills yesterday and I was shocked to see all of the random payments that you don’t account for.

Student loan consolidation could help you make larger payments with fix rates and get closer to attacking the principle. Where many students it could take 20-30 years, you may be able to get it done in 10 years or maybe even shorter. Just think to yourself what type of relief that will give you when you don’t have to worry about a long term debt like that any more.

Where To Go To Consolidate

Consolidating student loans can be done through the Federal Family Education Loan Program also know as the FFEL, along with banks, secondary markets, credit unions, and plenty of other lenders will provide those same benefits. These are all worthy options for you to take a look at during your four years in school. I know that is difficult for many of you because the last thing that you want to do is more reading, but I promise you that it will save you a lot of money down the road and create more freedom long term.

You will actually find out that many federal education loans are capable of being consolidated whether they are subsidized or not. Some of these include Stafford Loans, Perkins Loans, and Federal Nursing Loans. Whatever loan you may have, make sure to check your commitments or covenants in the contract.