Do you have bad credit and thousands of dollars of student loans to repay? Few students plan to start their post-college life this way, but it's a common situation. You may realize that it's important to put together a debt reduction plan, but you may not know where to start. Consider the following steps to begin paying down student loans, credit card debt and other bills.
Debt consolidation for federal loans
Student loan debt consolidation may be the best solution if you're juggling multiple federal loans. Consolidation of your federal loans, which is usually done separately from your private loans, will often result in lower monthly payments. The interest rate on a consolidated loan will typically be the weighted average of the interest rates on the original loans, rounded up to the nearest one-eighth of a percent and capped at 8.25%.
Private student loan consolidation
Your credit score is an important factor when you consider a private student loan consolidation. Depending on your credit, consolidating private loans may or may not make sense. You probably want to consolidate debt from private loans if your credit score has significantly improved since you borrowed for school. If your credit score has declined since then, consolidating may not offer a better deal. Also keep in mind that when you consolidate debt from private loans, you may be offered a fixed or variable interest rate. It is important to note the difference to prevent your payments from rising in the future.
Suspending loan payments
Other options that could help if you're having trouble paying student loan debt is to get a deferment or forbearance, which would suspend payments for a period of time. During a deferment, the government pays the interest on your subsidized federal students loans. If you are granted a forbearance, you are responsible for the interest that accrues during that time.
Chances are if you're struggling to pay student loans, you may also be dealing with credit card debt and other bills. If you are in over your head with debt, find a reputable debt counseling firm that can help you put together a plan to clean up your finances.