Paying for college is costlier than ever, and now a growing number of students may be unable to take advantage of debt consolidation services. That’s because private lenders who have originated student loans rarely offer to consolidate student debt. This can make life difficult for college students, who, according to CollegeBoard.com, graduate with an average of more than $20,000 in debt. It’s possible for these students to receive debt consolidation help for their federal student loans. Their private loan debt, though, may act as a noose around their necks.
An Economic Reality
Lenders stopped consolidating private loans during the Great Recession’s credit crunch. This is a market that has not returned to life even as the economy begins its slow recovery. Even those few lenders who are offering to consolidate private student loans won’t offer college graduates the best rates. Most of these debt consolidation loans will come with variable interest rates. This means that college students won’t be able to lock in today’s stellar interest rates for the long-term. What options do students graduating with tens of thousands of dollars in student loan debt have? Not many. They’ll have to hope that they can land a job that pays enough to allow them to pay off their private student loans; no easy feat when the nation’s unemployment rate is close to 10 percent.
Credit Card Debt Rising, Too
In addition to their large amounts of student loan debt, college graduates today are also saddled with a rising amount of credit card debt. MSNMoney columnist Liz Pulliam Weston wrote in a recent column that the average college graduate carries $3,262 in credit card debt. Some students feel that this additional debt is of little consequence because they’re already carrying such a huge debt burden from their federal and private student loans. This is flawed thinking, though: credit card debt comes with exorbitant interest rates. It’s debt that has a habit of growing, too.
Debt Consolidation An Option?
It’s far from ideal for college students to graduate and immediately have to resort to debt consolidation loans. But depending on the size of their debt, and their success at landing a high-paying job, college students may have few other options. Yes, debt consolidation loans often come with high interest rates, too. They also can bring down a student’s credit score. But debt consolidation loans can also bring peace of mind: College students who take out debt consolidation loans at least gain some control over the overwhelming levels of debt they face. And until private student loans again become possible to consolidate, debt consolidation loans can at least help them pay down some of their student loan and credit card debt.