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How to Reduce Your Monthly Student Loan Payments By Consolidation

Updated on May 26, 2012

So you have just graduated college, and maybe your employed, maybe not. It's been about 6 months or so now, and your college loan debtors are finally starting to call you right? It's a pretty common occurrence amongst newly graduated individuals. Speaking as a supporter of higher education, I was very understanding when my wife told me she wanted to attend nursing school. I wasn't so happy about the upcoming college loan debt though. The overall process took about 3 years to complete from start to finish. This included completion of prerequsite courses to actually get her into the college program of her choice as well as the 2 year program to get her AS degree win nursing.. Oh and one more thing, she didn't want to stop there.... Her college offered a special advanced program that would also allow her to get a Bachelor's Degree with only one additional semester by adding additional classes and working through at least one summer.

Like many young American families, we weren't able to actually just cut a check for her educational expenses. Because of her course load, she worked a very limited amount of time at a nursing home for awhile and eventually ceased all employment as she geared up for the difficult nursing classes. This left us with only a single income, and bills to pay. The only option we had was to actually apply for student loans. Again, this isn't so bad it's like free money side the interest rate is so low right? Not exactly.... Over the course of 3 years, there were approximately 4 student loans that we had to take out totaling almost $45,000! This seems like quite a bit of money for college, and it certainly is, but it didn't all go to tuition.

Each semester, she essentially had to reapply for loans through the Federal Government FAFSA program and she was approved for more than her actual tuition. She had the option of accepting the difference in the form of a check or returning it to the financial institution. Of course we accepted the check. With each huge chunk of money we received, we also received a note about what the money could be spent on. Essentially any expense related to going through college. This included living expenses, books, and any supplies she needed. Living on a single income we were glad to receive the cash as a way to supplement the fact that her paycheck was dwindling down to almost nothing if anything at all.

So here we are 3 years down the road. She was fortunate to get a job as an RN right out of school in the specialty field that she wanted. It's good money, but since she had minimal nursing experience, she started off at the bottom of the totem pole as far as pay goes. Now e have two incomes, but and everything was great. Skip ahead another 6 months, and now we needed to start payments on her student loans. In total there were 4 different loans that were provided by a total of 3 different financial institutions! Because of the amount she accepted, the payments would be in excess of over $600 a month! If you add in my student loans, as a family we would be paying more than our mortgage in money that we spent over 3 years ago! Obviously our budget couldn't stretch that far so we embarked on a way to help lower the monthly expenses in regards to the loans.

We researched taking out a line of credit on our home, but since the housing bubble has shattered, we weren't able to get any money to consolidate via this method. As it turns out, we weren't the only US family to go through this process. The Federal Government actually has a student loan consolidation program! That's right, you can consolidate all of those loans into one monthly payment to one provider. Now there are positive and negative aspects of utilizing this program, but for our family it seemed like a logical choice. Basically, the US Department of Education will pay off your loan providers and lump everything into a single lower monthly payment, but as a trade off, you extend the life of your student loans to a whopping 20-25 years! The wife and I did the math and now that $45,000 loan is actually cost around $75,000 by the time we actually pay if off. Incidentally right around the time our kids are going through college. The positive aspects are of course a lower monthly payment, and no repayment penalties. As with most simple interest loans, if you make more payment than required it reduces your interest and the overall amount of the loan.

So why would anyone in their right mind stretch out a long and pay more money? Simple, by reducing our monthly expenses, we freed up money to pay down other higher interest debts. For example credit cards. We have already paid off multiple credit cards with the monthly surplus, freeing up even more monthly resources. The goal is to pay down higher interest loans and keep shifting the monthly payments. Once all of our credit card debt is paid, we will begin paying off the student loans quicker than required, reducing the overall interest owed. It's sorta like just concentrating on a single debt at once rather than paying the monthly minimums for everything, and staying in debt forever.

But wait, there is another light at the end of the tunnel! The Federal Government has a Public Service Loan Forgiveness Program! In 2007 congress created a program that if you work in a public service industry for 10 years, you might also be eligible for loan forgiveness. There are a few requirements, as you actually need to work in public service, and not all hospitals qualify if they are for profit institutions. In addition, you need to make at least 120 payments towards your loan.. That's 10 years, coincidentally the same amount of time as a standard student loan.. But IF YOU HAVE CONSOLIDATED your loans, this could be a great opportunity to eliminate the remainder of the student loan debt.

The end result is that we now have a lower monthly paying, which is helping us out financially with other obligations reducing our overall debt, and in 10 years the balance might be completely forgiven due to working for a public service organization! If you want to check out specifics of a loan consolidation and the forgiveness program checkout the links below. Remember these options might not be right for everyone, but could certainly help out.


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    • RichardPac profile image

      RichardPac 5 years ago from Sunny Florida!

      Thanks for the kind words! Hopefully this can help a few folks out. We can all use a bit of a leg up in this trough economy.

    • Phil Plasma profile image

      Phil Plasma 6 years ago from Montreal, Quebec

      It is really great that these programs exist, and it is also great that you have brought them to light. Hopefully the people who could really benefit from these programs discover your hub.

      Paying the high interest debts first is really the best thing to do, no doubt about it. Voted up and useful.

    • pandula77 profile image

      Dr Pandula 6 years ago from Norway

      Very informative hub! Best wishes to keep up the good work!