Loan Consolidation Program as a Tool for Understanding & Managing Your Future

Managing your debt, particularly your education student debt may be one of the most critical, most misunderstood and most confusing tasks you will undertake in planning and managing your future. With the enactment of the Deficit Reduction Act of 2005 many aspect of student loans and consolidation have changed dramatically.

A Federal Consolidation loan is a practical education debt management tool that bundles all your Federal student loans into a single loan that can decrease your monthly payment burden by as much as 50 percent or more.

Consolidation can turn “Too Much Debt – Bad Debt” into “Good Debt – Manageable Debt”

Consolidation allows you to stretch your repayment period from the standard 10 years to up to three times as long, depending on the amount of your education debt.

You can gain financial balance and advantages in managing your finances when consolidating. With consolidation, lower salary levels necessary to reasonably manage and support your debt become possible; which is vital during your early career lower income-earning years. Reaching your goals via student loan consolidation represents a win-win situation.

With consolidation, you will pay more in interest because you are extending your repayment period. However, do not let this “you pay more in interest” point confuse your understanding and appreciation of the outstanding financial benefits made possible with consolidation.

Although consolidation will generally cost you more in total interest when the full consolidation repayment term is used there are scenarios where paying more in interest is an intelligent, sophisticated and savvy financial planning strategy.

It is very important to recognize the daily living, savings/investment potential and value of consolidation. With consolidation you keep possession and control of money saved from lower monthly payments.

By having more discretionary money in your control earlier in your career, you can seek safer, longer term, less risky investments. Such advantages historically can earn you higher returns because your money works longer and harder through the accrual and compounding of interest. More funds translate into more options in providing for your future. Without consolidation this after taxes and deductions cash will not be available until you pay off your student loans; thus losing years of accrual and compounding interest which can account for thousands to a hundred thousand dollars or more depending upon your loan balance.

In addition, if the interest rate of the consolidation loan is lower than other debt or savings/investment options, then paying more in lower expense interest may be a sound financial plan because with federal student loan consolidation there are no fees, no penalty for early payments and consolidation reduces your debt-to-income ratio which is a major component in determining credit-worthiness for major purchases such as homes and automobile.

As with all significant financial decisions professional advisors should be consulted to assure that your unique situation is addressed. For example, in choosing a longer term repayment plan with consolidation if you have a family you wish to provide for should something happens to you or your ability to work then you will want to understand and consider disability and life insurance. However, do note that consolidation loans will be discharged upon death or if you are eligible under the regulations governing a discharge due to a permanent and total disability. Discharge for permanent and total disability for a condition that existed before you applied for consolidation will not be approved unless a doctor certifies that the condition substantially deteriorated after the consolidation loan(s) was made, rendering you totally and permanently disabled.

For Undergraduate, 1st, 2nd and 3rd Year Medical Students – It is not too early to begin thinking about federal student loan consolidation and your future!

Undergraduate, 1st, 2nd and 3rd Year Medical Students want to minimize borrowing as students and only borrow as needed for the direct cost of your education and “basic student needs” not “lifestyle”.

With the passage of the Deficit Reduction Act of 2005 medical students who have exhausted their Stafford eligibility should consider the Grad PLUS program before applying for a private/alternative student loan. As an undergraduate and undergraduate medical student, you should become financially savvy and take control of your money. You should become credit savvy and take control of your credit and credit score. As a student this is mostly an effort to limit debt and be very conscience of what, where and how you spend your money (financial aid and earnings). It also means that you should have a plan for repayment, which most likely should include consolidation as well as loan forgiveness or some other form of service or refinancing where possible.

Make sure that you understand and confirm in writing the criteria and procedures for student loan lender’s “borrower discounts, rebates, bonus benefits”. It can very difficult for anyone without expert knowledge of consolidation to critique borrower benefits. For your enlightenment and review, we have provided a critique of a consolidation program and its borrower benefits. This critique was requested by a medical school financial aid administrator who recognized the unique and specific character of consolidation and wanted an unbiased review so as to accurately and comprehensively advice students. See Critique below.

Remember that discounts that are not reasonably achieved and maintained are worthless. If the benefit seems too good to be true, most like there is a catch.

Before signing a consolidation application, review our Loan Consolidation Guide, Consolidation Discounts - Too GOOD TO BE TRUE? , which will assist you in deciphering and understanding the fine print of discount benefits. Should you have questions, do not hesitate to contact an MEDebt Solutions Consolidation Counselor to assist you in understanding what is “actually” being offered.

Never ignore any letter or notice from your lender or servicer.

For more accurate and trustworthy information and to discuss your individual options, contact an experienced, knowledgeable MEDebt Solutions Loan Consolidation Program Counselor for a free of charge, no pressure, no obligation Personal Consolidation Diagnostic Review (PCDR).