The high cost of college tuition causes some students to graduate deeply in debt.
Sallie Mae, a government agency that deals in student loans, reports that students and their parents borrow between $30 billion and $40 billion a year to help pay for advanced schooling. This reliance on student loans is largely due to college costs that outpace inflation.
College borrowers frequently have several loans held by more than one lender, with varying rates on each loan. This makes figuring out whom to pay–and when and what to pay them–a financial nightmare.
Consolidating many loans into one with a fixed-rate monthly payment often is a wise choice for college graduates because it can decrease overall interest rates and extend the payback period to reduce monthly payments.
Still, potential consolidators should note that the extended payback period could increase your total costs. For this reason, it’s important to try to pay off the loan early. As your yearly earnings increase, step up payments to avoid the longer interest payments.
For more information on consolidating student loans, contact First New York FCU.
