Student Debt Consolidations – What Are My Options?

Find Solutions to Overwhelming Student Loan Payments

Like many people in your generation and generations before you, you took out student loans so you could attend college or university, get a diploma or degree, and land a career that pays well. Whether you left school early or haven’t reached your financial goals with your current position, you are still obligated to pay off all student loans. If you are in search of repayment options for student loans, we have a few choices with a simple FAQ to help you shrink that financial mountain down to something more manageable.

 What are the Different Student Debt Solutions?

Every person’s financial picture will be different, but there are a few approaches to finding student loan debt relief. You may want to look at student loan debt consolidation, refinancing, or if your financial situation is extreme, possibly declaring bankruptcy. If you have been out of school for at least seven years, bankruptcy will extinguish and discharge the government student loan in full. However, you need to be tackling the problem well before that seven-year threshold is reached.

Let’s explore some options!

What Does it Mean to Refinance Student Loans?

This is likely the most comfortable option you have before you. Refinancing means you take the existing student loan and roll it into a new loan with a lower interest rate and possibly a longer payment term. Essentially, you’ll apply for the new loan through a bank, not the government. This can provide student loan repayment assistance by lowering your monthly payment. This is an excellent option as it alleviates some of your stress and allows you to live a normal life.

What is Student Loan Consolidation?

Like many other recent students, you may have taken out multiple loans from different programs to pay for your education. They may have different interest rates, payment schedules, and requirements. You might be wondering if you can consolidate student loans. Student loan consolidation will allow you to combine all of the loans into a single loan. At this time you can also negotiate new interest rates and payment schedules.

What are the Differences between Student Loan Refinancing and Student Loan Consolidation?

The big difference is that student debt consolidation will reduce the number of monthly bills that arrive in your inbox. Sometimes this helps you to create a more manageable budget through streamlining your monthly responsibilities. Also, it is more likely to find a lower interest rate on a larger loan, so by combining several loans into one, you may find more options available. It will be easier to be approved for a simple refinancing.

What are the Benefits of Student Loan Refinancing?

You are making a positive change to your financial responsibilities. If you were planning on paying off your student loans with a credit card, that is merely a stop-gap measure that will ultimately increase your debt and fees, leaving you worse off now than you were when you started. Refinancing could lower the interest rate, which even if you make the same payment as you do now, more money goes towards reducing the principle. You pay off the loan sooner, which puts more cash in your pocket in the long run.

If you need more cash for monthly bills right now, refinancing with a longer repayment term can help you bring your current budget back under control

What are the Benefits of Student Loan Consolidation?

Besides a lower interest rate bringing you student debt relief, consolidation offers a few other perks to the struggling graduate. If you default on your government-backed loans, your tax refund can be garnished in payment. When you transfer your student loans to a private bank, your tax refund is now yours to spend–even if it should be used to pay off your debt. It certainly makes life simpler with a single payment marked for your student debt every month. However, if you hope to have your student loan forgiven in a few years, consolidation will prevent that from happening.

How Do I Determine What’s Right for Me?

Now that you have a few repayment options for your outstanding student loans, which one is best for you? You will need to take a good look at your current financial situation, come up with a realistic budget that includes food, rent, utilities, transportation, subscriptions, and entertainment. From there you need to determine whether there is enough to cover your loans. Take some time and lay out all the information you have available to help you decide which loan consolidation plan will help or hinder. And when in doubt, or if you need more assistance, you can always contact a professional debt counsellor and Licensed Insolvency Trustee to get the support you need.

Do I Qualify for Student Loan Refinancing?

The bank will take a variety of factors into account when reviewing your application for refinancing. They will want proof of income and will check your payment history and total debt to income ratio. They will take into consideration all of your debt, including any credit cards. If you are employed and have a good–not perfect–credit score, you have a good chance of being approved.

If you are simply overwhelmed by your student loans and are uncertain about refinancing, consolidation, or are thinking about a bankruptcy or consumer proposal to avoid bankruptcy, give the professional debt counsellors at Baker Tilly Ottawa Ltd. Licensed Insolvency Trustees a call. We can provide a clear vision of all your options and help you work your way to financial stability!

Our passion—our mission—is your health and well-being!