Consolidating Student Loans Means Relief for Graduates

Today's graduates are leaving college with a lot more than a diploma. The average student loan bill is over $24,000 thanks to a sharp increase in tuition that has outpaced inflation since 1990. How are grads balancing their budgets these days?

When Christine began college, she was one of the tens of thousands of students that year that paid for college with a student loan. Paying out of pocket wasn’t an option, she says, and neither was passing up college out of fear of repaying a loan.

“At the time, there wasn’t much difference from my perspective between $5,000 and $50,000” she says. “I figured that by going to school I’d be investing in myself and would be able to pay it back, no problem.” It wasn’t until 6 months after graduation, when the student loan payment was due, that she realized that her $22,000 debt would cost her $257 a month; a large chunk of her starting salary budget.



Christine’s story isn’t uncommon. Rising tuition costs and loan repayments have created student loan payments that are beyond the budget of new grads on a starting salary. At first, she was able to defer the loan, but once the deferment ended, her income didn’t qualify for forbearance. “I didn’t know about student loan consolidation until I got a letter in the mail,” she says. “At first I dreaded opening it because I thought it was someone asking for money—but now I’m really glad that I did.”

Debt Levels of Undergraduate Degree Recipients by Degree and Institution Type, 2003-04

Source: "Trends in Student Aid 2005" Copyright © 2005, the College Board, www.collegeboard.com. Reproduced with permission.

The solution was a student loan consolidation that extended her payments to 20 years instead of 10 and offered a low fixed interest rate as opposed to the variable rate of non-consolidated student loans. The $257 a month payment became a $122 payment; a manageable amount for Christine’s budget.

“Now I’m able to put aside some money each month for a down payment on a home,” says Christine. “If I hadn’t consolidated there is no way I would have been able to afford to save.” So while colleges and universities have had to boost their tuition rates in order to cover costs, Congress and the Federal Student Loan Consolidation program have continued to ensure that paying for college is still an option for anyone with the desire to seek higher education.

Read More

Step-by-Step for Student Loan

Student Loan Consolidation Step-by-Step



You understand the benefits of consolidating student loans such as lower monthly payments and the ability to pay a single bill rather than writing 5-10 different checks each month. But what exactly is the process of consolidating student loans?

Student Loan Consolidation: Overview
Because of the additional benefits of federal student loans, federal and private loans must be consolidated separately. If you have both types of loans, it’s recommended that you begin
by consolidating your federal student loans first, as this will result in the greatest cost savings.

Step 1: Verify your current loan standing
Your current student loans must be in good standing and not in default status. If they are, you’ll need to make the payments required to get them paid up to date before consolidating student loans.




Common questions and concerns:
Q. My loan is in forbearance or deferred; is this considered being “in good standing?”
A. Yes, as long as you have not defaulted on your loans, you can consolidate with ScholarPoint.

Step 2: Gather required information
You’ll need the contact information of 2 friends or family members and the names and addresses of your current loan companies. To save yourself a step, ScholarPoint can instantly access all of the necessary information about your current lenders from the National Student Loan Database system during the application process with your permission.

Common questions and concerns:
Q. Will those I list as references be responsible for paying my loan if I default?
A. No, your references are not cosigners. Like any lending institution, we collect reference information just in case we can’t reach you by mail or phone once you have a loan with ScholarPoint.

Step 3: Apply online
It’s important to note that just because you submit an application with ScholarPoint to consolidate student loans; this does not mean that you’re required to accept the loan. If, and only if you like the rates and payment terms, you can electronically sign for acceptance of the consolidation loan via ScholarPoint’s secure system. If you’d prefer to physically sign the application, you can print, sign, and mail it directly to ScholarPoint for processing.

Common questions and concerns
Q. The application asks for my social security number, will you run a credit check to consolidate my federal loans?
A. No – there is no credit check required at any point during the process of consolidating federal student loans.

Read More

A Guide to Private Student Loan Refinancing

There are two different types of student loans; federal and private. Federal loans, like the Stafford Loan and the Perkins Loan, are backed by the federal government. Interest rates on federal student loans are determined by a weighted average and capped at 8.25%. Private student loan consolidation rates on the other hand, are determined by your credit score and can be significantly higher. If you've got both federal and private student loans and are looking to consolidate, there are few things that you'll need to keep in mind throughout the process.

Can private student loans be consolidated with federal student loans?
No. By combining federal and private student loans, you would lose out on many of the benefits of your federal loans including the ability to place your loan into a deferment or forbearance status, as well as the low federal interest rates.



What interest rate can I expect when I consolidate private student loans?
Private student loan interest rates aren’t regulated like those for federal student loan consolidation. Instead, private student loan interest rates are based on an index plus a percentage determined by your credit score. It may be possible to obtain a lower rate on a private consolidation loan with a cosigner or guarantor on the loan.

What other options are available for consolidating private student loans?
There are far fewer options for consolidating private student loans than with federal student loan consolidation. Many borrowers choose to consolidate their private student loans through a home equity refinance. For borrowers with variable interest rate private student loans, consolidation through a home equity loan can offer a fixed percentage rate and extended repayment terms.

Refinance federal student loans first
Because private student loans don’t have the same consolidation benefits, most experts strongly recommend refinancing federal student loans before attempting to consolidate private loans. Since most borrowers use federal student loans to fund the majority of their education and obtain private loans only to fill in the gaps, refinancing federal loans now may give you the relief you need.

Read More