Credit Card Counseling Debt Consolidation:

Consolidating Student Loans

Do yourself a favor and don’t ask that question here, because all you’re going to attract are the scam artists that frequent this topic area.

Let me offer a few bits of advice:

First of all, paying $100 as a fee to be granted a forbearance may seem practically criminal, but the costs of consolidating your loans will be far more expensive than $100.

A consolidation loan rips up all of your old loans and replaces them with a single new loan. Consolidation loans are sold with the promise that you’ll lower your monthly payment – and that’s almost always absolutely true.

HOWEVER, what they don’t tell you – while they’re pushing the idea of a lower payment – is how they manage to offer you a lower payment. Think about this – either they’re going to lower your payment by significantly lowering your interest rate (nope), they’re going to lower your payment by forgetting about some of the money you owe (never), or they’re going to lower your payment by simply having you make a lot more smaller payments (bingo!)

Suppose you owed me $100, and we had agreed that you’d pay me $50 this week and $50 next week. You come back and explain that $50 is really more than you can afford right now – and you ask if there’s anything we can do to lower your payment. I’d say “absolutely! – how about if you only pay me $10 a week, would that work for you?”

You’d think this was pretty nice of me – until I told you the other part of the deal. You’d pay me $10 a week, but you’d make 15 payments of $10. So what’s happened? Now you’re going to pay me $150, not $100. That’s how a consolidation loan works.

The only difference is that we’re not talking an extra $50. Depending on the terms of your consolidation loan – and how much you already owe, chances are that you will pay tens of thousands of dollars more in interest if you choose to consolidate your loan. That’s a heck of a lot more than the $100 Sallie Mae wants to grant you a forbearance.

Before considering a consolidation loan, talk to Sallie Mae about their alternative payment programs. There are programs that start out with a lower repayment and increase later, when, hopefully, you have more income – ask them for more information.

Finally, you may find consolidation a very difficult thing to arrange right now. I’m sure you’ve been watching and listening to the news about this country’s banking crisis, if not – you should be. This current crisis is really impacting the student loan business – and there is little or no private educational lending going on right now. It’s not just student loans either – I would wish you a lot of luck trying to find a car loan or a mortgage right now, unless you have a substantial income and a sterling credit history.

If Sallie Mae is willing to offer you a forbearance, and you really need it right now, swallow hard and pay the $100. That’s the cheapest and most certain alternative for you right now.

Good luck, I hope that helped.