Why Is College Debt Consolidation Good to Have?

College debt can be frustrating. Just ask Tim, who happens to be a student of the Boston University. When the Boston University accepted Tim’s application, he felt as if his long-standing dream has been fulfilled. However, this dream came crashing down when he realized that he did not have sufficient funds to  finance his education. His parents suggested applying for a student loan. Luckily for Tim, his loan application was accepted. But Tim’s worries were far from over. Tim is a native of Wyoming and has shifted to Boston in a bid to get a better education. This forced Tim to seek another loan that would cover his house rent, food and other petty expenses.

The other day, Tim was taking a stock of his debt situation, when he realized that he owed money to 12 different creditors. Moreover, he also realized that the interest rate varied from creditor to creditor. His credit card issuer was charging him a 15% interest rate on outstanding balances, whereas he was paying an interest of 7% on his student loan.

If you are a student pursuing a course from an American university, then Tim’s situation might ring familiar to you. Rising education costs has made college debts an indispensable part of a student’s life. Student loans, credit card expenses, expenses related to one’s house rent, food and clothing etc are the major components of college debt. At times, it becomes difficult to manage all the creditors. In fact, Dorothy a psychology student at Massachusetts College of Professional Psychology states that it becomes so difficult to remember the different due dates quoted by various creditors that one ends up paying late fees. She also states that college debt consolidation can prove to be a perfect solution to streamline your debts.

Now, many of you might be interested in knowing more about college debt consolidation. Well, it entails borrowing a new loan to pay off all your existing debts. The main advantage of college debt consolidation is that it allows you to organize and streamline your debts. Take for instance the case if Nathan who is pursuing a full-time course at the Boston Arts Academy. Before going in for a college debt consolidation loan, he had to handle 14 different creditors. Not only did it mean getting involved in a lot of paperwork but remembering 14 different payment dates. After consolidating all the loans, Nathan is answerable to a single creditor and has to make a payment on the 15th of every month.

In the opinion of Jessica, a student at the Urban College of Boston, college debt consolidation can also help one to actually lower the amount that is being paid by way of interest. Jessica states that she had three creditors in the form of the bank that issued her the student loan and the other two being the issuers of her two credit cards. Jessica states that while she was required to pay an interest of 10% on one card, the charge for the second credit card stood at 15%. One of her friends, who happened to be working with Citibank’s Boston branch, advised her to apply for a second loan with her current bank. She used the amount to clear her outstanding credit card balances as well as to clear her student loan. Now, Jessica has a single creditor, i.e. the bank that gave her the second loan, and pays an interest of 10% p.a.

David Brooks, a employee with Bank of America’s Boston branch, states that though students opting for college debt consolidation stand to gain as US laws state that lenders who are interested in lending loans to students cannot charge an interest rate that is more than what is being charged by the Federal Family Education Loan Program. In addition, lenders also give incentives to those who make the payments before the scheduled dates. Hence, college debt consolidation can help you to secure a loan at an interest rate that is lower than the interest you pay on credit card balances.

But Jason a sophomore student at the Urban College of Boston warns against college debt consolidation, especially, if you happen to have received Perkins loans. When Jason decided to consolidation his Perkins loans, it lead to a cancellation of all benefits and he also lost out on the interest subsidy.

Experts also state that one should preferably visit various lenders before settling for a college debt consolidation, as this will help one to bag a better deal.

So, if you are student who is having a harrowing time managing your debt, it is time to go in for a college debt consolidation.

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