credit

How Does Student Loan Consolidation Work?

Nowadays, the cost of higher education is getting more and more expensive. Some families may not be able to afford further education for their son or daughter. Getting a student loan will help.

There are 2 broad categories of student loans available. Government student loans and private student loans

Government or federal student loans are funded and administered by the US Department Of Education. It is classified under Federal Student Loans Aid Program. They have very few requirements other than you are studying in a US college or university. International students may also apply though approval is on a case by case basis.

Every year, the student loan aid program disburse nearly 60 billion dollars so it is a good choice for get a student loan from the government. The interest rates on federal loans are pretty low.

Private student loans are funded and administered by banks and other financial institutions. These lenders provide student loans at a higher interest rate compared to federal student loans. Some common student loans available are from Citibank and Sallie Mae

You are allowed to apply for both private and federal student loans for your education needs although I would not recommend it.

For some students who have a few student loans to repay concurrently, it can be a financial drain on their family finances. That is where student loan consolidation comes in.

Student loan consolidation basically consolidates all your student loans into one loan so that it is easier to manage and make payments. When you are getting a student loan consolidation whether from the government or the private market, your existing student loans are paid for and erased by the student loan consolidation lender. The balances are transferred to the new student loan consolidation. Thus you start a new loan and only needs to make a single payment each month.

There are many advantages to using student loan consolidation. The interest rates will be lower since it takes the average interest rates of your previous student loans. Thus due to government legislation, the maximum interest rate cannot be higher than 8.25 percent.

It becomes a lot easier to manage a single student loan and payment are easier. The repayment options are quite flexible. For federal student loan consolidation, you can opt to start repaying after you have graduated from school. There are also several other options.

Another beneficial side-effect of student loan consolidation is that it can also improves your credit score. Since you are effectively clearing all your old student loans and taking a new one, your credit score will increase and is important if plan to take other types of loans in the future.

You can apply for a consolidated loan here.

Whatever your choices may be, remember the words of Benjamin Franklin: “Knowledge pays the best interest”.

For more information on student loans in general check out my post about Types Of Federal Student Loans.

Credit Cards For College Students: Finding The Best Available

Student credit cards are geared primarily toward college students. But there are many factors that can make credit cards for college students the right choice for young people. So, it is very important for all consumers, not just students, to first learn about each type of available card and then choose the one that is most suitable.

Secured credit cards are one type of card for students to consider. These cards are funded in advance of purchases and do not actually extend a line of credit in the form of a loan. Rather, the cardholder sends money to the card ahead of time and uses those funds to make purchases later. In essence, a secured credit card is a bank account that does not earn interest, but can be accessed easily with the swipe of a credit card.

Secured credit cards for college students are a popular choice with many students and their parents. One of the reasons for the popularity of these student credit cards is the fact that it is not necessary to have a credit history in order to receive the card. Of course, most college students have not yet had the opportunity to build a credit history. Therefore, a secured credit card is an attractive option. In addition, secured student credit cards typically offer instant approval and do not require employment verification or even a bank account in order to receive a card.

Secured credit cards are also popular with parents because they can “load” the credit cards with as much money as they see fit for their college student. Loading a credit card is simply placing money on the card. Parents can generally choose to have money directly added to the card with each paycheck. Or, they can send money through the mail in the form of a money order or cashier’s check. There usually are also banks that will accept payments to be added to the credit card.

With a secured student credit card, parents can essentially provide their college-going child with an allowance to pay for food, school materials, or any other need the student may have. At the same time, there is no risk of the college student building a huge debt on an unsecured credit card. Once the money is spent, there is no more for the college student to spend. Secured credit cards for college students are a great way for parents to help teach their children to be responsible and independent while still providing a little help along the way.

Another benefit to using secured credit cards for college students is that many report to the major credit bureaus. In this way, the college student can begin building credit without the concern of harming his or her credit rating by being unable to pay the debt off.

For some college students, secured credit cards are not the most attractive option. One reason is because there tends to be a great number of fees associated with secured credit card. Theses fees include application fees, processing fees, and annual fees. There is generally also a fee associated with loading funds onto the credit card. Though these fees usually range from $1 to $5, the fees can add up over time.

Another reason secured credit cards may not be attractive to a college student is because the student is truly on his or her own and unable to receive financial assistance from the parents. Or, the college student may simply not have the funds available to place on a secured credit card ahead of time.

No matter the reason, unsecured student credit cards are also a popular option with credit cards. Credit cards geared toward college students are specifically designed for individuals with little credit history. Often, the Annual Percentage Rate (APR) on these cards is higher than average. Therefore, it is best for the college student to pay off the card at the end of each billing cycle whenever possible. As with secured student credit cards, unsecured credit cards for college students go a long way toward building the student’s credit history.

Bankruptcy And Students: Many Students Fail To Pay Off Their Debt

Young people in their early twenties, of which many are students, are becoming a fast-growing number of bankruptcy filers. Bankruptcy and students seems to be becoming a problem, and according to recent surveys, it is believed that teenagers younger than nineteen years of age own at least one credit card of their own. Also, it is reported that two thirds of undergraduate students have a minimum of one open credit card account, and it is believed that the average student graduates owes three to four thousand dollars in credit card debt along with other debts.

Managing Student Finances for the First Time May be a Reason for Defaulting

With more college students being marketed credit cards, it has even made some states enact legislation that limits solicitation to college students and recent bankruptcy reform procedures are also concerned with addressing the problem of bankruptcy and students. The reason behind bankruptcy and students becoming a big problem could lie in the fact that college students are learning to live alone and manage their own money for the first time, and thus find it hard to keep track of their credit card purchases.

According to experts, people tend to shop more with credit cards than when spending cash. When interest, late charges, increase in minimum payments are factored in, it makes for difficulty in managing finances and thus leads to bankruptcy and students becoming a growing malpractice.

Bankruptcy and students loans that are not repaid can often make a student feel as if he or she has just graduated from the school of hard knocks. Bankruptcy is not the escape route that students may be thinking of taking in order to avoid paying back government backed student loans as well as school loans backed by non-profit agencies. These loans are not discharged in a bankruptcy and have to be paid back after bankruptcy, though if a student can prove (very difficult actually) that the loan constitutes a considerable hardship, it can be got rid off without repayment.

Student loans, under normal circumstances, cannot be discharged under any chapter of the Bankruptcy Code. By using loopholes in government legislation, bankruptcy seems to offer an escape route to avoid paying off student loans, and the number of students that used bankruptcy to avoid paying off their debts increased dramatically over the recent past few years.

The bottom line is that it is the bankruptcy judge that has the final say, and for the lucky student, the odd bankruptcy judge may allow him or her to discharge the loan by filing for bankruptcy. Lenders too, cannot send their bills to a student who is in bankruptcy and need to wait till the case is decided. Often, it is better for the student to deal directly with the lender and find a mutually agreeable way of settling the debt, rather than going in for bankruptcy to avoid repayment.