Information on Managing Your Education Loans
Lower Your Monthly Payments
Advanced degrees often come bundled with advanced levels of student loan debt. Graduate students may seem well positioned in the working world, but in many cases they are just as lacking in practical experience as are undergrads.
Grads that 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.
Others must fend for themselves and the standard six-month grace period can go by all too quickly.
Graduate Loans Mount Up
Graduate student loans at the very least 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, students may have private or alternative loans to pay off, as well.
Undergraduates that migrated directly into a grad school program would never have become eligible to begin repayment of their undergraduate student loans. Now they have all of them to account for.
Undergrads that took time away from college; 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.
Factors to Consider Before Consolidation
Regardless of the repayment situation, graduates struggling to juggle monthly payments must consider consolidation an option:
- 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?
Available Consolidation Programs for Graduate Students
So you’ve decided consolidation might be the best route. For many working adults, especially those with families and other financial responsibilities like homes and cars, student loan consolidation could be a godsend. The best advice is to first consult one of your lenders for guidance. 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.
Federal Loan Consolidation for Graduates
Federal loans, 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 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.
Private Loan Consolidation for Graduates
Private student loans have grown in popularity over the last five years. If you are like many other students, a private loan can finance the remainder of outstanding college tuition at the graduate level once federal loans and scholarships are paid out the college or university. In fact a crop of lenders offer specialty-specific graduate loans that target the more costly college programs, such as law school, medical school, and business school.
Private graduate loan consolidation typically requires you 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.
All About the Timing
Once students reach the graduate level in school, associated loans come bundled with different terms. Federal loans originating prior to July 1 2006, feature variable interest rates and those change each July 1. So it’s not difficult to imagine that the timing of a loan consolidation can make all the difference in the world. For 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.
