You’ve just graduated with your bachelor’s degree or maybe even a post-graduate degree and the dreams that led to your path of higher education are now met with a frigidly austere economy. Sadly, after your grace period ends, all of your earnest intentions won’t wash with hungry creditors, but don’t despair.
A whole industry of debt consolidation has risen to meet exactly these challenges. Here are some things to ponder if you think refinancing student loans might be the best option for you.
Be Clear About Why You’re Consolidating
If you’re on the verge of defaulting on your loans, you’ll most likely be looking for solutions, and the opportunity to refinance refinance student loans is one of your prime options. Yet before you move forward with this option, you have to be sure that this is the right option for you.
If you have both federal and private student loans, for example, be aware that these loans cannot be consolidated together. You can consolidate federal loans through the Department of Education, but private loan consolidation companies will only be able to consolidate private loans.
Weigh the Pros and Cons
If you decide to refinance your student loans, one possible drawback is that you might end up paying more in the long-term. This is because by signing on for a longer payback period, the interest on your balance has more time to rack up.
On the other hand, your monthly payment could drop considerably. For example, if you owe a combined total of $50,000, you could save less than $1000 annually. Additionally, by consolidating your loans you’ll have the security of having a fixed interest rate, rather than having a number of loans whose interests fluctuate according to the current whims of the market. Considering the highly precarious state of the global economy, this is an incomparable asset.
There’s also the added convenience of only having to make one payment per month. Finally, although some people think that consolidation is a similar process to bankruptcy, it doesn’t cast any shadows on your credit rating whatsoever. (For similar reasons, student loans are the one debt that is not forgiven in a bankruptcy proceeding.)
Be Aware Of Your Credit History
Your potential for refinancing student loans may depend on your past record of paying back debts, so get a rating from at least one of the Big Three ratings companies, a process that should cost less than fifty dollars. People often assume that having had few credit cards or making a few late payments will tank your credit, but this isn’t true. Making steady car or rent payments, for example, can give you upstanding ratings, so seek out the actual numbers rather than second-guessing yourself.
If you discover your rating issub-par, all is not lost. You can almost always refinance with the aid of a reliable co-signer.
Feel Confident in Your Ability To Repay
Signing up for a refinanced student loan won’t do any good if you’re not sure of the road to repayment. As a rule, you should have at least $2000 per month in documented income to apply for consolidation, so if your job status is uncertain, you may want to hold off.
This is an even greater concern if you’re bringing a cosigner into the picture, as defaulting will negatively affect their credit rating. On the other hand, making a year of payments on time will relieve your co-signer of any liability, so if you feel solid in your imminent earning power, let your possible co-signers know.
Arm Yourself With the Necessary Paperwork
There are a number of services out there to help you get back onto your feet, but count on having at least the following documentation on the ready:
-Names and contact info of all relevant schools
-Detailed personal contact information.
-Social security and driver’s license numbers.
Whether you only took out a few thousand for community college or went in deep for a Ph.D., chances are debt consolidation may work for you. Make sure you do your homework and avoid rushing towards a hasty decision and you’ll be back on a steady course in no time.