|
|
July 19, 2002/Av 10 5762, Vol. 54, No. 44
Loan consolidation aids graduates
ELIZABETH DIETERLE
Special to Jewish News
College graduation signifies many promising life changes - budding careers, independence and new beginnings. However, it means the beginning of something altogether less enjoyable, too - student loan repayment.
Repayment of sizeable education loans can be daunting for some students and their parents. A recent analysis by the Public Interest Research Group reports the average debt among student borrowers is now in excess of $16,500. According to the Associated Press, graduates of public universities and colleges typically owe more than $10,000 for their undergraduate years, while graduates of private schools may owe more than $14,000. Graduate-level students can owe more than $24,000, while those studying medicine or law can accumulate even greater debt.
More and more people are turning to consolidation loans as debt management tools, according to Don Fenstermaker, president, co-founder and CEO of Phoenix-based Pinnacle Peak Solutions Inc. (PPS), a service organization providing students, parents and families with information necessary to understand college finance. Consolidation allows borrowers to combine their existing federal education loans into a single loan, while simultaneously fixing their interest rates.
According to Rob Creel, vice president of NextSTUDENT, PPS' Phoenix-based daughter company, consolidation is the best loan-financing option for graduates - especially recent graduates who are just getting established and are liable to be cash-poor. Most borrowers, unaware that they can consolidate their student loans, borrow against their 401(k) or mortgages at higher rates of interest.
"You can save thousands in interest charges by instead consolidating into one new fixed-rate loan," said Creel.
While federal student loans such as Stafford Subsidized and Unsubsidized carry variable, annually adjusted interest rates, federal consolidation loans carry lower fixed interest rates for the life of the loan. Students who refinance with consolidation loans can lock in a single rate up to 4 percent lower than the variable rates on their previous loans over a longer period, by expanding the term of the loan, normally 10 years to 30 years. The consolidation process is analogous to refinance booms occurring regularly in the mortgage industry when interest rates decline. However, unlike mortgages, federal student loan rates change only once a year and borrowers are charged no fees to consolidate their loans.
Other advantages of consolidation include retention of deferment and forbearance benefits, extended repayment programs and drastically lower monthly payments. Consolidation improves a borrower's credit score by replacing multiple lenders with a single lender holding the borrower's new consolidation loan.
Dieterle is in-house editor at NextSTUDENT. For more information, call (800) 658-6801, or visit www.NextSTUDENT.com.
|
