Nowadays, with the economic difficulties American consumers are facing and the ongoing credit crunch, graduating students are facing a worrying future, most especially those who are carrying large credit card debts. Currently, graduating students carry an average of $23,000 in debts.
That's a very large debt to be carrying for students and the parents who support them. Fortunately, after July 1, students are going to be able to participate in a few debt consolidation programs that will offer them better chances at paying off their debts through much lower costs and a more agreeable payment arrangement.
Students can easily apply for a debt consolidation arrangement which usually comes with no extra fees. The special offers are usually available for a grace period of six months after the student graduations. This is a typical scenario and may not be true for all. If a student applies for a debt consolidation during this grace period, they can get very affordable rates for their debt consolidation loan.
Students who are using the Stafford loan could see a rate drop from 3.61 percent to 1.88 percent. For students who are already repaying their loans at 4.21 percent, the drop could be as low as 2.4%. Students who are in the PLUS loans could see a drop from 5.01 percent to 3.28 percent.
Mark Kantrowitz, the publisher of the college financial aid industry tracking website FinAid, says that these rates being offered are “historically low”. He also adds that it is unlikely that these low rates will be available later on.
Up to July of 2006, federal student loans had variable rates with an upper limit of 8.25 percent for Stafford loans and 9 percent for PLUS loans. Afterwards, the rates were fixed to 6.8 percent for Stafford loans. Subsidized Stafford loans have been decreasing for every year. Starting from 6.8 percent, it is now at 3.4 percent though it is scheduled to return to 6.8 percent unless Congress acts against it. The FFEL Plus loans are also currently at a fixed rate of 8.5 percent while the Direct PLUS loans are at 7.9 percent.
With the new, lowered rates of these student loans, students carrying heavy debts after graduation should now have a better chance of tackling with their debts. Debt consolidation is also a necessity for students who want to opt for a deferred payment plan for their loans. A deferred payment plan can give students ten to twenty years to pay off their debts, depending on the plan that they get.
However, students should know that a deferred payment plan can significantly increase the cost of the loan.