Dennis Powell

You did it! You scrimped and saved and studied and worked and borrowed more money than you ever have in your life, but you did it! You finally finished school. Most likely, you’ve got a few months of grace period to get settled into your new job – hopefully it’s in the field you studied for – and then those student loan payments are gonna start coming do. Plan now to keep your expenses in check while ensuring that managing your education debt is a part of your long term financial plan.

Most people start their borrowing with a Federal Family Education Loan or FFEL. FFELs cover both subsidized and unsubsidized loans, and an FFEL consolidation loan can wrap both of a borrower’s federal loans into a single manageable package. FFEL consolidation programs offer extended repayment terms and fixed rates, and in some cases even those who have been in default in the past can qualify. If you have any federal education debt an FFEL consolidation loan should be the first place you look.

In addition to traditional federally funded loans, many students finance their advanced education with a variety of private loans. Private consolidation of these loans offers borrowers many of the same benefits as federal consolidation – fixed rates, longer terms, and lower payments. Conditions may be stricter for a private consolidation and you cannot usually combine private and federal loans under a single consolidation package. You may end up with two consolidation loans, one for your federal debt, and one for private; be sure to shop around for the best rates.

Many parents use the PLUS loan program to borrow for the children’s education. PLUS loans can be consolidated using a PLUS consolidation program much which offers similar benefits and potential pitfalls of FFEL and private consolidation – fixed rates, and lower payments spread over a longer term. Plus loan consolidations are great for some people but parents need to take a good look at all of their options before consolidating.

There are many alternative ways of consolidating education financing. For homeowners a second mortgage may provide a better solution to a consolidation loan giving the borrower the option to put of their education loans into a single package. Private loans from family members are another way some grads handle their finances, and for a lucky few, some employers even offer tuition reimbursement programs.

New technologies have come to the lending world where the idea of peer-to-peer programs and micro-financing has taken root. Peer to peer financing allows the borrower to present a request for funding to a group of potential “micro-investors” who then bid on the loan by offering different rates and terms. Once a deal is struck the network services the loan, ensures payments are made and the necessary paperwork is taken care of. For borrowers with needs outside the comfort zone of traditional banks a P2P loan may help them get started down the path to getting their loans paid off.

Making the transition from school life to your career is a road with more than its share of lessons and challenges. Having to make large student loan payments on an entry level salary while trying to save cash for a professional wardrobe, deposits on housing, and other “grown-up” essentials is enough to stop that progress dead in its tracks. There are many things to consider when applying for a consolidation, but knowing that you have options available can help make your transition manageable.