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Managing Student Loan Debt after Graduation

  1. Generally, student loans and the interest accruing on those loans can be deferred while you are in school at least halftime.
     
  2. Most loans have a grace period of 6-9 months.
     
  3. You must NEVER lose track of your loans—keep a central file and put every bit of loan info in it. Start now!
     
  4. If you end up with a lot of debt and multiple lenders, you should consider loan consolidation. Loan consolidation means that a single lender (Sallie Mae, for instance) pays off all of your individual loans. In exchange, you get one new loan for the same overall amount at a fixed interest rate. The interest rate might be better or worse at the time you consolidate. (Right now, fall 2004, interest rates on consolidation loans are near their all-time low.) The consolidation loan can be paid over 10, 20, or even 30 years depending on the offerings of your lender. Lenders often also offer sliding scale payback, where you start off with lower payments that gradually increase over time.

Benefits of Loan Consolidation:

    • One lender to deal with;
    • One monthly payment;
    • Significantly lower payments if you spread your loan repayments out longer than 10 years;
    • Potentially lower interest rate;
    • Makes other financial transactions easier, such as buying a house. Some mortgage companies strongly urge you to consolidate your debt.

Drawbacks of Consolidation:

    • If you spread your loans out over several years, you will incur significantly higher interest charges. You may even double the amount of money you will ultimately pay back on your loans;
    • Potentially higher interest rate.
    • Under current law, you can only consolidate once.

 


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