Student Loan Debt Consolidation - A wise step towards becoming debt free

There are plenty of online sites to help a student to consolidate student loans. Educational loan interest rates run from about four percent for HEAL loans to over eight percent for PLUS loans. Application for  federal debt consolidation is easy and fast but remember one thing. A person may have lousy credit and no cosigner and no job but bankruptcy is out of the question as far as the government is concerned. Filing chapter seven where a person can walk away from all debts does not include any money owed to Uncle Sam including student loans and taxes owed. Tax refunds will be garnished as well as other actions taken if a student defaults on educational loans from Lady Liberty. But if the consolidation loan is paid on time each month, a student can quickly build a very fine credit score which will be of great value all of the student's life.

Private Student Loan Consolidation from a private source such as a bank, other requirements come into play. Mr. Banker is not nearly as accommodating as Uncle Sam and will require that the recent undergraduate degree holder have a co-signer for approval along with at least two references. Additionally and here is the big one, an applicant must provide monthly income and expense figures. For a recent graduate, that one could really hurt, especially if the job is entry-level and a new car to celebrate graduation was recently purchased. In that case, the co-signer better be related to King Midas. The effort to acquire a debt consolidation loans from a reputed debt consolidation company will be rewarded by the student being able to push undergraduate loans all the way out to twenty five years if desired. Graduate students can go to thirty years.

It may be difficult for a young graduate to fathom the length of time it will take for paying off educational loans, especially if the loan amount is akin to the size of a mortgage payment. The move towards credit card debt settlement, debt elimination or acquiring a bill consolidation services for most students is a must in order to survive the month to month grind of paying bills. But there needs to be a strong warning given to all students who desire school but must borrow large sums of money to attend. While faithful paying of bills every month of every year is commendable, just a couple of thirty days late payments can wreak havoc on one's credit history.

Additionally, the recent graduate needs to understand how credit scores (FICO) are assembled and one of the most important factors is the debt to income ratio. If the percentage of a person's monthly income is more than forty percent loaded with credit payments, including school loans, even if the bills are paid every month on time, the credit score will be affected. Wisdom would dictate that trying to have all the things that one's parents have accumulated over decades with credit is the beginning of a lifetime of financial pain.

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