The COVID-19 pandemic has impacted the world economy, and many families have recently found themselves struggling. Although federal student loan repayments were initially placed on administrative forbearance until September 30, 2020, many college graduates are still struggling to find jobs and pay rent, and still need student loan relief.
Student loan consolidation may be an option for you, even if you currently hold private student loans. Loan consolidation is the best way to unlock a lower monthly payment by accepting a new loan with better terms and conditions.
Although many financial institutions provide student loan consolidation, some charge high fees or interest rates in an attempt to turn a profit. Choosing a credit union as your loan consolidator makes it easier to get a low rate that can provide relief during this ongoing crisis.
How Does Student Loan Consolidation Work?
A financial institution can refinance your student loans by paying off one or more existing loans, then charging you a new low monthly payment with a lower interest rate. Student loan interest rates can be 10% or more, so your new monthly payment can be lower than the old one without even extending the length of the loan term.
You can get some relief even if your principal balance is still high. Many borrowers refinance while their student loan balance is $10,000 or more.
Student loans have an impact on your credit score, but unlike credit card debt, they are considered a healthy long-term debt. Refinancing your student loans may cause a small temporary dip in your credit score, but this drop resolves itself quickly. For most student loan holders, the lower monthly payments are worthwhile because they free up money for other expenses and even paying off other debts.
Private loans typically have higher interest rates than federal subsidized loans, causing your monthly payments to be higher than necessary. These are prime candidates for consolidation, especially if you have multiple loans through various providers.
Federal loans through the Department of Education, such as Stafford and Perkins Loans are also eligible for consolidation. Although repayments on these loans were temporarily placed on hold due to the CARES Act, you can still include them in loan consolidation to secure a new lower long-term rate.
Both undergraduate and graduate student loans can be refinanced, so you can get a better deal even if you were in higher education for a long time. Generally, the only student loans that can’t be refinanced are loans that are currently in default. If you’re one or two payments behind, you can still usually refinance, but your interest rates on the new loan may be slightly higher.
Managing Your Finances
As the COVID-19 situation continues to change, college graduates may find their finances stretched more than before. Student loan payments are a serious burden on working families, especially families that are out of work or have kids to feed. Private and federal student loan borrowers need every cent they can get to provide for their families and make their new budgets work.
One of the perks of student loan consolidation is that a longer repayment term results in lower monthly payments, allowing you to stay within a tight budget. If you’re providing for multiple other people on a limited income, this can be a serious lifeline, especially if you’re already most of the way through your existing loan term.
When to Consolidate
Because of the severity of the COVID-19 crisis and its economic effects, most college graduates struggling with student loan debt need relief as soon as possible. Your new student loan servicer can work to consolidate your loans and have the new payments take effect in less than 60 days.
Your credit score has a large impact on what rates and repayment terms you will be eligible for. In some cases, students with poor credit scores may benefit from waiting a few months for their credit score to increase before consolidating.
Depending on your credit history, some negative marks on your credit report may clear up within a few months. A local credit union loan officer can advise you on your best options and may be able to make you a deal even if your credit is poor.
Consolidating through a Credit Union
Unlike big banks, credit unions are nonprofit institutions that are controlled by an elected board made up of members. This allows them to focus on providing the best services possible to members and better deals on loan rates and terms. They also have personalized customer service that can meet the needs of individual members.
Talking to a loan officer at a local credit union is the best way to figure out a consolidation and repayment plan that’s right for you. A loan officer will know the local economy and costs of living, and can give you a realistic idea of what kind of monthly repayments you should be making.
You can also submit your initial application online to see what rates you qualify for. Our system can give you a basic idea of what rate you can offer you. However, if you’re struggling due to COVID-19, you should give us a call to see what customized debt consolidation and loan solutions we can offer you.
Student Loan Consolidation Rates
Traditional student loan providers offer both fixed- and variable-rate loans with interest rates usually between 6-8%, but sometimes as high as 14%. Some will offer a low introductory rate in order to lure in students, then increase the rate depending on market factors.
At T&I Credit Union, we partner with a student loan servicer to provide interest rates that are below typical market rates. These rates can vary from quarter to quarter depending on the market, but can be half as much as our competitors’ rates. We also strive to keep fees as low as possible so you can focus on paying for other life expenses.
We’re able to do that because our nonprofit structure allows us to put our members first. Instead of trying to increase profit margins for shareholders, we prioritize providing services to members who need them, even during times of financial crisis.
Partnering with T&I Credit Union
T&I Credit Union is committed to serving our community during this ongoing crisis. We know that your financial situation may have changed dramatically during the past several months, but we’re always looking for ways to serve you better and provide some financial relief.
In addition to student loan consolidation, we offer home equity loans, mortgage refinancing, car loans, and other financial assistance to members. Membership is free and open to anyone in a seven-county area around the Detroit Metro area. Even if you live outside that area, you’re still eligible to join if you work or worship inside it.
Our team will walk you through the process of setting up your membership and applying for student loan consolidation. Even if a new stimulus bill is passed, we’ll still be here to help you with your financial needs and answer your questions about what’s right for your future. Give us a call today at 1 (800)-338-3908 so we can start serving you.