A chief worry occupying the mind of students is the debts that they accrue while at college, and not necessarily their studies. These debts can be considerable when tuition fees and living expenses over three or four years are combined. Managing that debt can be a big challenge, but by consolidating college loans the financial pressure can be reduced.
There is no shortage of options available to students looking to consolidate their debts, but it is important to realize that private loans and federal loans are usually treated differently. Finding a federal financial aid package that suits the needs of a student is not too difficult, and there is a good range of federal consolidation programs to choose from.
In fact, there are four programs for college loans granted by federal sources. The specifics of these plans relate to restructuring the existing loans, reducing the monthly repayments and overall making the debt more manageable.
Also, the applicant does not have to be a student, with people in mid-career who still struggle to pay off their student debt also catered for.
1. Standard Consolidation Plan
This is the most straightforward plan for consolidating college loans and is designed for recent graduates who now have a source of income. The level of income might not be very much though, so the need for aid is pretty strong.
The key element to the whole plan is that the term of the existing loan is extended to a maximum of 10 years. This means that the payments due each month are less than they would have been otherwise. This federal consolidation program also features interest charged a low fixed rate, so budgeting is made easy.
2. Extended Payment Plan
This consolidation plan is basically the same as the Standard Plan, but the difference is that the loan term limit is extended to between 15 and 30 years. This makes the Extended Payment Plan ideal for graduates who have a low income but who face large college loans.
The chief advantage of this plan is that, with such a long term, the size of the monthly repayment is made very low. This makes payments much easier to meet, greatly reducing the risk of missing one. And with low fixed interest rates making sure that the monthly costs are kept to a minimum, it is almost the perfect plan for consolidating college loans.
3. Graduated Payment Plan
For students with the pressures of study and debt repayment to face together, the availability of a federal consolidation program that allows repayments to be made in a graduated structure is great news.
This plan requires a very low monthly repayment sum, with the sum increasing in regular increments every two years. The structure is designed to reflect the financial reality of students as they move through college and into the working world. The maximum lifespan of this option is 30 years, so fully repaying college loans can still take some time.
4. Income Contingent Payment Plan
The most complicated of the four plans for consolidating college loans, the Income Contingent Payment Plan features carefully calculated repayment sums. It is not just the income of the student that is taken into account though, but also the income of their family. With family often helping out, this federal consolidation program allows for the debts they already face to be taken into account.
Basically, by keeping their family out of a tight financial corner, the amount of financial support for the student is lessened, and the college loans can be cleared in accordance with what is truly affordable.