7 things to know before borrowing a student loan consolidation

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Avoiding student loan consolidation is and can be a difficult task given 54% of all students need student loans to cover their university expenses. However, he also wishes to note that among the 42.9 million students receiving student loans, more than half of that number, 52% say it was not worth it.

In today’s article, we’re going to look at the factors you need to consider before proceeding with a student loan consolidation"}” data-sheets-userformat=”{"2":8705,"3":{"1":0},"12":0,"16":10}”>student loan consolidation

1) How much money do I really need?

The first thing you want to know is how much money you actually need to pay for your tuition, books, etc. This will help you determine whether or not you are entitled to financial assistance such as grants, scholarships, work-study programs, loans, etc.

If you feel that you are not getting enough funds from other sources, you may want to consider borrowing money.

2) What will my monthly repayments look like?

The next step would be to find out what kind of interest rate you are being charged on your student loan. The average monthly payment as stated by federal guidelines is $ 393, which is 10% of your gross income.

You should also make sure that there are no hidden charges that could increase your total cost. For example, if you borrow $ 5,000 but end up paying an extra $ 100 per month due to late fees, this is not something you would want to happen.

3) Will I recover taxes on my loans?

Another important factor to consider when deciding whether or not to borrow money is whether or not you will receive tax relief on your student loan payments. There are many types of student loans out there, so check them carefully to see if you qualify for any benefits.

Here are some examples :

– Tuition fee exemptions – These allow you to waive part of your tuition fees.

– Interest-free periods – During these periods, you will not have to pay interest during your studies.

4) Can I afford to pay off my loans sooner without affecting my credit rating?

Your credit score will only be negatively affected if you default or have late payments. Other than that, prepaying your loan is a plus for you as you will be able to save on interest rates accrued over time.

The repayment plans offered on the federal loan range from 10 to over 20 years, which will lead to the average amount of accrued interest of $ 26,000 over 10 years.

5) Am I entitled to an interest-free period or a repayment holiday?

The federal loan gives all students a six-month suspension period after graduation and you are also accepted for repayment when you start the course. But you can decide to use this time by paying the accrued interest on your student loan.

Then, after you graduate, if you get a job soon after, you can save enough to pay off a significant portion of your loan.

6) Loan forgiveness

Now, in addition to the grace period that you can benefit from, you can also benefit from a loan discount based on your preferred career path. For example, teachers, lawyers or doctors are eligible for a public service loan exemption program.

If you decide to offer your expertise in a public service capacity or in a low income institution that primarily focuses on service to the public and you regularly pay off your loan, you may be eligible for a loan forgiveness.

7) Your loan provider

Federal and private loans have distinct differences depending on the loan capped at interest rates. The interest rates for a federal loan are between 2.75% and 5% while private loans can be between 4% and 13%.

The limit for a federal loan can be up to $ 31,000 for your entire course, but varies each year depending on your addiction and your school year. Your ability to repay a private loan will determine how much you decide to borrow to cover your education.

The references;

Student loan debt statistics

Student loan debt statistics (2021). Available at: https://educationdata.org/student-loan-debt-statistics (accessed August 12, 2021).

Student loan debt: statistics and outlook for 2020

Student loan debt: statistics and outlook for 2020 (2021). Available at: https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007 (accessed August 12, 2021).

Suspended student loan interest rates

Suspended student loan interest rates (2021). Available at: https://physiciansthrive.com/student-loans/suspended-interest-rates/ (accessed August 12, 2021).

Average student loan payment

Average student loan payment (2021). Available at: https://educationdata.org/average-student-loan-payment (accessed August 12, 2021).

WRITTEN BY:

Naomi Olson [Website Twitter Headshot]


I am CFP® (Certified Financial Planner).

I have a severe phobia of bridges and dirty balance sheets.

Hobbies: blogging, meditation, and loving Bull Market (my dog). “



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