Information on Managing Your Education Loans

Lower Your Monthly Payments

Advanced degrees often come bundled with advanced levels of student loan debt. Students may be tempted to stay in school beyond their undergraduate degree as a way to keep from paying off their first student loans, but the debt keeps growing as their education continues. Soon enough, graduate school is over, graduation day comes and goes, and there you are with considerable debt and desperate for a job.

Lucky grads who come out earning decent salaries are typically among the set wooed by top engineering and tech companies, or those with which they’ve done internships. But if you are like most grad students, you have been in school for many years and have little real world experience. Graduate students may seem well positioned in the working world for their academic qualifications, but in many cases they are actually just as lacking in practical experience as undergrads – but in more debt.

You are sent out into the world to fend for yourself, and make the best of the standard six-month grace period that goes by all too quickly. Then loan repayment begins. Monthly payments seem like a given at this point, but if they could be lowered, or even cut in half, they would be feasible. Luckily, consolidation is an option that can make this a reality. Though it stretches your loan payments out over a longer time, it does make them more affordable and less stressful, so in some situations is the best decision to make.

Graduate Loans Mount Up

At the minimum, your graduate student loans probably include a number of federal loans such as the Stafford Loans and Graduate PLUS Loans. Where federal loans, scholarships, fellowships and grants have fallen short, you may have chosen to supplement the costs of college with private or alternative loans and now have those to pay off, as well.

There are a number of scenarios that put graduate students drowning in debt at this point. Undergraduates that migrated directly into a grad school program would never have become eligible to begin repayment of their undergraduate student loans. These old debts must now be paid off.

Undergrads that took time away from college and started a career and/or family before they went back for a graduate degree might have been interrupted in their student loan repayment. These borrowers have undergraduate loans probably suspended in deferment, and new graduate loans in addition.

What are your options now? Depending on your financial circumstances and success in getting a job directly after graduation, you may wish to consider total loan consolidation. This process will extend your payments over a longer time, but it will cut them down sometimes to half of what they would be. These smaller, more manageable payments can make a world of difference when you are just getting started on your financial career.

Factors to Consider Before Consolidation

Regardless of the repayment situation, graduates struggling to juggle monthly payments must consider consolidation an option. Before you commit to consolidate, ask yourself these questions to determine if it is a wise choice:

• How many loans do you have? Federal? Private?
• Where in your repayment are you? Within grace period?
• Are any loans in default?
• How many lenders do you have?
• Are your monthly payments difficult to manage?
• Do you have other monthly financial responsibilities?

Consider your situation carefully. Would you rather budget and save and pay your loans off as fast as possible, no matter what? Or would you rather pay what you can now, and keep paying smaller amounts until everything is taken care of?

Available Consolidation Programs for Graduate Students

For many working adults, especially those with families and other financial responsibilities like homes and cars, student loan consolidation could be a godsend. If you decide that consolidation is the best route for you to go, the best advice is to first consult one of your lenders for guidance and a good consolidation plan. Lenders for the federal loan program include the federal government’s Direct Loan Program or a Federal Family Education Loan Program (FFELP) lender, such as the very well known Sallie Mae. More information on Direct Loan Consolidation can be found here.

Federal Loan Consolidation for Graduates

Federal loans stemming from both undergraduate and graduate programs may be consolidated under the Federal Loan Consolidation Program. The interest rates are fixed and determined on a “weighted average” of loan interest rates and capped at 8.25. If your current loans are variable, this stability could be very advantageous. Loans within the six-month grace period may also qualify for lower interest rates. You may consolidate through the Federal Government’s Direct Consolidation Loans Program if you have a subsidized and/or unsubsidized Stafford Loan to include in the process.

Consolidation of your federal loans through a FFELP lender are best compared for their borrower benefits, the only freedom most lenders have with the federal family of loans. However, most lenders will not qualify defaulted loans under their FFEL consolidation programs. Your FFEL lender is positioned to offer you their best deals and guidance in consolidating your graduate federal loans. Also FFEL consolidation loans are exempt from credit checks. Also, because timing matters (see below), make sure your lender allows you a grace period in which to add another loan. This may be very useful in the long run as you get closer to paying off your debt entirely.

Private Loan Consolidation for Graduates

Private student loans for graduate students have grown in popularity over the last five years both on their own and as a way to fill in the gaps in cost that federal loans and grants/scholarships do not cover. If you are like many other students, you may have gotten a private loan to finance the remainder of outstanding college tuition at the graduate level once your federal loans were expended. Or you may have borrowed from the popular crop of lenders offering specialty-specific graduate loans that target the more costly college programs, such as law school, medical school, and business school.

Private graduate loan consolidation, unlike federal, typically requires you to have good credit or apply with a creditworthy co-borrower. Lenders have a lot of flexibility with their private loan products, versus the federal consolidation program. You will find lenders, such as Sallie Mae, that require a minimum in loan balances; and those, such as Bank of America, that are willing to bundle auxiliary educational loans like those used for textbooks and computers, into the private loan consolidation. Check with your lender to see what incentives and packages they may have to offer those wishing to consolidate. You have the freedom to do some shopping around in this regard, as the terms are often much more variable than in federal loans.

All About the Timing

Once students reach the graduate level in school, associated loans come bundled with different terms that make timing key in the acquisition of those loans. For example, federal loans originating prior to July 1 2006 feature variable interest rates and those change each July 1. These seemingly small differences enable the timing of a loan consolidation to make all the difference in the world. In another example, Grad PLUS Loans for Graduates and Professionals are eligible for consolidation as soon as they are disbursed to the college or university, in contrast to Stafford Loans that may only be consolidated after graduation. This may offer you a timing advantage, but so much relies upon your other loans that you are best advised to check with your lender as soon as possible for the best consolidation plan for you.

Remember to keep a level head and only commit to repayment options that fit into your budget, lifestyle, and financial circumstances. With the variety of different lenders, length of time to pay, payment amounts, and interest rates, there is certainly a suitable plan specific to you that will enable you to pay off your debts and simultaneously be able to enjoy your graduate degree and career.