Student Loan Consolidation

Trends for student loans

Nearly 50% of recent college graduates took out student loans, with an average borrowed around $10,000 (1). Until recently, student loan interest rates ran between 6-8%. Recently, though, rates have fallen very low. As of fall 2003, Stafford loan interest rates were in 3-4% range.

Students who currently have loans, either a single loan or multiple loans, have a variety of options for reducing their payments and indebtedness. Because interest rates have fallen, loans can be consolidated or in some cases refinanced. When you're considering refinancing student loans or student loan consolidation, you need to compare interest rates before you consolidate federal student loans.

Effects of student debt

Like any debt, student loans can influence your credit and your future decisions. Students who borrowed a substantial amount for college (more than $5000) are less likely to pursue higher education (1). In addition, student loan debt that exceed 8% of your income can be seen negatively when your credit gets assessed for future loans (this is especially true if you have one or more defaulted student loans).

Two ways to reduce the debt burden are: 1) reduce or eliminate the principal balance. Specific types of loans can sometimes be forgiven by service or other higher education - look into the specific student loan program you have. 2) Reduce your monthly payment. Since debt burden is measured by comparing your loan payment to your income, reducing your payment helps your credit evaluation.

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