Student Loans: How Consolidation Programs Make Clearing Them Easier

The financial pressure that students and graduates are under to repay their student loans can be so high that it is akin to taking on a mortgage before actually securing a first job. To alleviate this pressure, it has become necessary to consolidate the debt into one sum, making it not only less complicated to repay but more affordable.Of course, securing approval to sign up to an affordable consolidation program is the challenge. There are programs available that can prove more costly, but the availability of government operated and subsidized schemes means that very low interest rates can be enjoyed.The most prudent option for those who have just come out of college is to secure a refinancing agreement that slashes the required monthly repayments, allowing them to begin their lives more positively and avoid defaulting on their debts so early on.Why Consolidating is a Good IdeaIt might seem to some that taking out a new loan to deal with existing loans is counter-prodictive, but it is not. When a number of student loans have been taken out, each loan has its own repayment schedule, repayment terms and rate of interest. This not only complicates the debt, it also means that the overall costs are higher.By turning to an affordable consolidation program, the total debt is cut. This is because the individual loans are bought out with one loan, and the result is that just one interest rate is applied. So, instead of paying 4% on a $30,000 loan, 4.5% on a $35,000 loan and 5% on another $30,000 loan, one loan sum of $95,000 is faced at 4%.The difference can translate to savings of as much as $500 per month, depending on the lifespan of the loan and other terms of the refinancing agreement.Public Consolidation ProgramsWhen it comes to getting government help to clear the mounting debt created by student loans, there are two consolidation options available. Students and graduates can choose either a direct loan or an FFEL loan, both of which have their advantages.A direct consolidation loan is structured in such a way that the graduate makes repayments directly to the US Department of Education. It means the agreement is straightforward, making this structure the most affordable consolidation programs available, with low interest rates and easy repayment schedules.The FFEL loans, meanwhile, are subsidized by the government rather than completely funded by it, so the refinancing agreement is effectively made with private lenders. This means that repayments are made to banks or credit unions, though the support of the government does mean that the interest rate is low.Typical Terms and ConditionsWhether consolidating student loans or any other type of loan, there are terms and conditions that lenders must apply. These are strictly adhered to because they are designed for those in real need rather than those who are otherwise looking for an easy way out.For example, applying for an FFEL consolidation loan is restricted to three windows. Firstly, immediately after graduation, during the grace period lenders offer graduates. Secondly, when repayments have already begun and the pressures of making them have become apparent. And thirdly, when a deferment may have been granted by lenders, and the need for an affordable consolidation program is clear.It is worth noting that the maximum lifespan of a consolidation loan is 30 years, so even a debt of $150,000 can be repaid with comfort. Without doubt, this kind of refinancing agreement alleviates the pressure that so many students and college graduates face.