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Payback time for student loans.

As June end approaches every year, most college graduates come face to face with the harsh reality of paying back for their student loans. Most of the loans student, for the first time start paying attention to the borrowings they have made to complete college education. With the realization that they must now begin paying back for this student loans, the search for payback options begins.

The tension lines on the forehead become intense, when they take a look at the huge outstanding balance and the short term of ten years within which they have to pay the amount back. The problem gets further escalated because the starting positions, in most professional fields, after graduation dont have a good pay package. With the low initial income, paying big monthly payments can completely stress out the students, oftentimes keeping them away from concentrating on their career.

At the time of graduation most of these loans student do not even realize the kind of debt trap theyre getting in to, they keep on borrowing without paying much attention to the repayment aspect. However, when the graduation is about to get over and they have to start making payments for their borrowings in a few months time, the alarm bells start ringing when they look at the amount of borrowings and the kind of monthly payments that they have to make.

Anyways, there always is a solution to every problem, and the solution for managing heavy student loans begins with getting details about the amount and the loan term from the source lender. The information related to all Federal student aid that you have used can also be had from the National Student Loans Data System which is the central data base of the U.S. department of education.

For the convenience of the loans student, the U.S. department of education has provisions for online access to this data base on their website To retrieve information from this website you will have to furnish some personal information along with your social security number and then key in the pin number that you have been given by the Department of Education. And in case you have forgotten your pin, the website has information on how to retrieve your pin number.

The normal repayment term for any Federal student loan is ten years, on the other hand there is a lot of variance in the payback periods for private student loans but generally it is around twenty years. Federal aid is usually not enough to take care of the total cost of education and so many students have to get private loans. Also private loans may be required because Federal student loans have a limit on the amount of money that can be borrowed by a student within a year.

With a big student loan balance and a lower income package, most graduates start considering the idea of consolidation of their student loans. There are numerous questions that come to the mind of these graduates about whether or not to go ahead with consolidation.

Most of these graduating students are sent mails and circulars by lenders, informing them about how they can lock in the interest rate with student loan consolidation and at the same time stretch over their repayment term from the usual term of ten years to as good as 30 years. The stretching of the repayment term is completely dependent upon the total amount of debts that the student has.

Their decision about consolidation of student loans should ideally be made before the end of the six month grace period which follows graduation, because after this the interest rates offers may not be as interesting. Every year the interest rates on Federal student loan consolidation are changed on the first of July and keeping a check on the predictions about the interest rate the students should decide on whether to consolidate before June thirtieth on after the first of July.

This July saw a major increase in the interest rate for most of the Federal student loans. The interest rate on Stafford loans went up to 6.54 percent as against 4.75 percent for students who were in the grace period or in deferment. And for those who were already in the repayment period the rates jumped from 5.37 percent to 7.14 percent. The rate of interest on consolidation of PLUS loans also went up from 6.1 percent to 7.94 percent.

At the time of consolidation, the rate of interest is decided on the basis of the weighted average of the different interest rates that the student was paying

over his difference student loans, and the resulting number is rounded off to the nearest one eighth of a percent. Although this will be a minor increase in the interest rate, still the students benefit because they can lock in the interest rate and become immune to fluctuations in the market interest rate.

Apart from the ability to lock in the fixed interest rate for the entire term of the loan, the bigger advantage comes in the form of a longer repayment term to get the most affordable monthly payments. Although it becomes easier to make the monthly payments, the student must give a thought to the total amount of cost that he will have to pay over the loan term because by extending the term of the loans student he is also increasing the total amount of interest that has to be paid over the loan.

The toughest element of student loan consolidation is making a choice about the lender. As far as the interest rate is concerned, it will be nearly the same with all lenders because the same formula for calculating interest rate is used by all of them. This means that the choice is to be based on the loan features and the lenders attitude and reputation. For instance there are lenders who offer special incentives like reduction in the rate of interest for regular payments or for direct debit facility. Some lenders may have other types of incentives instead of the reduction in interest rates such as cash rebates. There is no need for you to go ahead with the lender who does not offer you any additional benefits because the competition in the consolidation market is very fierce and checking up with other lenders you will be definitely be able to find a lot many attractive offers.

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