Bad Credit Private Student Loans – Should You Go For Consolidation?

Consolidation would mean one payment, to one creditor, on one day of the month, at one interest rate, and the payment being a lot less than the total of all the loans.

Stafford Loans, Perkins Loans, and PLUS loans are all federally funded programs to make financing available for every American young adult serious about pursuing a higher education. Others, lesser known exist, as well. But sometimes, depending on the discipline the student is following, these loans do not cover the full cost of an education – books, fees, room and board, etc. — even if the student is working part time. The student is then forced to seek private lenders to cover the extra costs and sometimes this results in the lender running a credit check on the applicant.

Private Loans and Federally Funded Loans

Student loans from private lenders and federally funded loans are somewhat similar. The biggest difference being what is required in terms of interest rates. Federally funded loans tend to have lower interest rates while private loans tend to have interest rates the reflect the current market rates, which, at times, can be rather high. So a private loan should be considered only when all other financial assistance venues have been exhausted. Most federally funded programs require repayment within 10 years. Private loans can be deferred or extended for up to 25 years. Of course, interest rates can rise with each deferment.

Dealing With Many Student Loans

Once the student leaves campus and is in a paying job, the installments on the various loans they used for school come due. It can be rather expensive and confusing paying three or four lenders at different times of the month, each with different payment amounts due and all at different interest rates. If that is the case you should consider getting your student loans consolidated. That would mean one payment, to one creditor, on one day of the month, at one interest rate, and the payment being a lot less than the amalgamation of all the loans.

Consolidation Has a Drawback

If a student has a couple of federally funded loans, these loans can be forgiven if the student works as a volunteer for non-profit charitable organization, or if they take up government work such as for social services departments, or job corps positions, the government can forgive the loans. That is, they can pay off the loans for the former student because of their service in these sorts of organizations. If those student loans have been paid off by a consolidation loan, they disappear as far as the federal government is concerned. So, now that the loans are being covered by a private lender, there is no way they can be forgiven.

Finding a Consolidation Lender

Your first step should be to draw up a budget and determine how much you can comfortably afford to pay every month. You should consider the highest amount you can pay that does not lead to privation. You do not have to live on ramen noodles like you did in college. Lenders will understand that you probably are not at your highest earning level at the time and will take that into consideration. Finding a lender for student loan consolidations is not that difficult. Finding one who will give you decent interest rates and payments comfortable enough to fit your budget will require some shopping.

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