Here in July we are a few weeks removed from many of the graduations which have taken place in May and June at major colleges and universities across the nation, and for recent graduates, it’s highly likely that many are going to have to face student loan debt repayment obligations as a result of borrowing practices during college which may have been necessary to meet tuition costs. However, many students, particularly those with multiple federal loans may be considering student loan consolidation as a way to get a more affordable monthly payment or to take advantage of forbearance options for those who may be unemployed at the present time.
Students often feel that when they opt for federal forbearance opportunities after consolidating their loans they will be in a better financial position in the long run due to the fact that missed payments can do a great deal of damage in the financial life of a student and, when it comes to the simple consolidation of their debt, many federal consolidation loan opportunities do come with a low fixed interest rate that is quite attractive to recent graduates.
The question that has arisen is: should students opt for a forbearance option on their student loan debts after graduation, particularly since there are grace periods which may allow students to either look for work or begin saving money before they have to repay this debt? In many cases, students who consolidate their loans will have to begin repaying their debt shortly after doing so, and for those who may be unable to find solid employment or are position where they can begin saving money may benefit from waiting to see whether they can pay off their loans separately rather than consolidating.
For those who are in need of debt consolidation due to the fact that forbearance can be offered through this option, there are some who question whether this is the best route for graduates to take as there are some options like income-based repayment programs that can help students find affordability on their monthly student loan payments without allowing interest to accrue, which can be the case during a period of forbearance. It goes without saying, students should opt for certain options over others particularly when the potential to miss payments is present, as student loan debt can be quite problematic but it will only hurt a graduate early into their financial life if they begin missing payments on these loans soon after leaving college.
During a period of forbearance students may continue to see their interest build, which could be added to the principal amount on their loan and cause higher overall costs, so exploring options like income-based repayment plans or taking advantage of a grace period to see whether students can affordably meet debt payments separately are options that should be explored by each individual graduate, but after reviewing one’s financial position, it needs to be determined whether consolidation, the need for forbearance, or traditional payments is present within their student loan situation so that the best route to debt relief can be formulated early on in the student loan debt repayment process.