Graduation is just around the corner for thousands of students, and shortly after they walk down the aisle, many in the Class of 2006 will find themselves facing hardships they didn't anticipate when they began the pursuit of their degree. The average American student will leave school owing $29,000 in student loans. Unless you plan to pay back all the money right away - which few recent graduates can afford to do - now is the time to come up with a plan. There is a six month grace period after graduation, but it will sneak up on you fast.
You basically have three options. You can opt for a graduated repayment plan in which your payments start out low, and then increase every two years. The repayment period varies from 12 to 30 years and depends on the total amount of direct loans you owe when your loans go into repayment.
Option two is to make the standard payment from the get-go so. With standard repayment, you will make a fixed payment of at least $50 a month for up to 10 years. For some borrowers, this plan results in the lowest total interest paid because the repayment period is shorter than it would be under the other plans.
But with interest rates rising, more and more people are strongly considering going with option three - consolidation. Student loan consolidation can significantly lower your monthly payment by lengthening the term of your loans, with no prepayment penalties.
"This is the time to be thinking seriously about debt consolidation because come July interest rates are definitely going up," says David Beach, chief marketing officer for financialaid.com. He points out that in February, Congress passed a deficit-reduction bill that cut $12 billion from student loan programs. Lawmakers had already approved a steep hike in interest rates for Stafford loans, used by nearly 10 million students each year. Both rate increases take effect July 1, 2006.
People who decide to consolidate their student loans with financialaid.com before the deadline can take advantage of the opportunity to lock in a fixed rate as low as 3.5 percent for the life of the loan.
Other benefits of securing a loan with the company:
* When you consolidate with financialaid.com you are eligible for their Borrower Benefits Package, which can reduce your interest rate by an additional 1.25 percent.
* All borrowers benefit from an additional .25 percent rate reduction when payments are automatically deducted from their checking account.
* Borrowers with $20,000 or more in student loans benefit from an additional 1 percent rate reduction after they make 36 on-time payments.
To learn more about loan consolidation and apply online, borrowers can visit the financialaid.com website at www.financialaid.com or call toll-free, (888) 868-1391.
Copyright © 2006, ARA Content
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