The National Student Loan Debt Consolidation Loan Program provides a unique opportunity for borrowers to combine their federal student loans and obtain instant relief. As per the current congressional budget, the Department of Education must provide funding to eligible students for an estimated two years beginning with the enrolling year of the borrower. As per usual, the process of applying for this program is fast and easy.
To understand how the NCLC works, it is essential to know about the average student loan debt that borrowers hold at present. The Department of Education has announced that in 2021 there were nine million total borrowers holding federal loans. Out of these nine million borrowers, six million borrowers are non-employed and another six million borrowers are employed full time but are behind in their repayment of their loans. Among all the six million borrowers, almost three million borrowers are delinquent in their loan repayments.
With this information it is easy to understand that the Department of Education’s ability to provide sufficient funding to students is being challenged by the billions of dollars in federal reserve accounts that have not been repaid. This is leading to dire consequences as defaults are rising on federal student loans. If the current trend continues, the government will be forced to raise the interest rates on its Stafford loans and will also hike the Federal Reserve rate. This would inevitably lead to inflationary pressures as well as a depression. Hence, if you want to avoid such a situation, you must act now to reduce your national student loan debt.
The best way to lower your debts is to get rid of your credit card debt. Credit cards are not exactly a reliable source of long-term debt because you rarely do any repayment on time and tend to spend lavishly. Hence, there are always high interests as well as penalties involved. Further, the minimum amount required to start repaying your debts with these cards is just about $1000 which is certainly not much when compared with the several tens of thousands of dollars required by unsubsidized loans and federal student loans.
Another method of managing your debts is to consolidate all of your loans into one, either by taking out a new loan or by transferring an existing loan to a fixed interest rate and repayment schedule. Consolidating your loans is undoubtedly a better option because you will enjoy a lower interest rate, more favorable repayment schedules and the option of refinancing at a lower cost if necessary. However, if you opt for consolidation of your federal or private educational loans, you will only enjoy benefits if the educational institution you are using is participating in the consolidated loans program. Most schools do not participate and hence you will not benefit from the program.
A third alternative that has gained popularity in recent times is the repayment plan known as the snowball method. This is a plan based on the idea of paying down your debt as steadily as possible until it is reduced to a level at which you can comfortably pay it off. The logic behind this plan is that if you stop paying your loan, you will incur large amounts of interest charges and late fees and you will not be in a position to repay your debts even if you take a loan from the federal reserve bank. With the federal reserve bank acting as your lender, you will not face any restrictions on the type of institution you can use to borrow money. One of the biggest disadvantages of the snowball plan is that most Americans who consolidate their student loan debt increased amounts of credit card debt or store card debt have experienced an increase in the total amount they are paying to these creditors.
The last resort for repayment options that was recently explored by graduates of American Universities is the concept of loan debt forgiveness programs. This particular plan allows students to get rid of their loans at lower than half of the original sum if they find themselves unable to repay their loans. A large number of people are eligible under the terms of this plan. An estimated thirteen million Americans are eligible for this service and could potentially receive a total of seventy-five billion dollars. The government has approved the plan in order to help reduce the burden of the future debtors. As soon as this legislation is implemented, it is expected that the amount of student debt relief will substantially increase.
A good example of the type of assistance available to the indebted is provided by federal loans. Federal loans provide students with the most extensive set of financial aid opportunities. These loans are structured so that a borrower doesn’t need to make repayment until he/she begins to earn his/her degree. A detailed research of the different types of federal loans is highly recommended prior to deciding on the best repayment plan for a particular individual. There are a number of private lenders that specialize in helping students deal with financial debt after graduating.