Comments on: Will the credit crunch affect your student loans?

By: krulz

krulz — Mon, 23 Feb 2009 01:04:58 +0000

Credit scores are numerical indexes based on an algorithm developed by Fair Isaac Company, called a FICO score. Scores are negatively impacted by events such as late payment, incomplete or partial payments, defaults, and judgements or liens, and range from 300 to 900. The actual algorithm is a trade secret of Fair Isaac, but the following breakdown approximates the weighted values that compose your score.

35% Payment history
30% Outstanding debt
15% Length of your credit history
10% Recent inquiries on your credit report
10% Types of credit in use

Now, consider this: student loan consolidation affects both your payment history and your outstanding debt, particularly in terms of number of loans outstanding. Federal student loans are often issued in subsidized and unsubsidized sub-loans, and new loans are issued each year. If you have only Stafford loans in college, you could graduate with 8 loans (4 subsidized Stafford loans, 4 unsubsidized Stafford loans) on your credit history, and those loans would have no payment information on them because you’ve made no payments (you were in school).

8 loans for 4 years with no payments doesn’t look like responsible borrowing to a computer that processes credit scores. Remember – computers do the vast majority of credit decisions today, not living, breathing human beings.

If you consolidate, those 8 loans are paid off and one new consolidation loan is opened in your name. Now you have a payment record on those 8 loans – and they’re all paid off. Again, to the computers of the world, this looks great! As a result, your credit score will increase when you consolidate.

By: shahadin

shahadin — Tue, 04 Nov 2008 13:55:11 +0000

The consolidated student loan will be capped at 8.25% and will also be rounded up to the nearest 1/8 of a percent. While you can save money on the consolidated rate in some instances, you do need to keep in mind that the weighted average actually may not change the underlying interested cost of the loan overall because it actually is the average of the interest rates for the overall loan balance of the individual existing loans.

By: Sugercan

Sugercan — Fri, 10 Oct 2008 14:12:43 +0000

Student loan consolidation can have many benefits for the career minded student. With the prices of things going through the roof, going to college can be very costly. Many students don’t have thousands of dollars to pay their way through college.

This is why many college students use student loans to get themselves through college. When it comes time to pay back their student loans, it can be a real burden and a distraction from their career.

By: College Loan Debt

College Loan Debt — Tue, 30 Sep 2008 00:51:19 +0000

The amount of debt that students need to go into is sad. What’s worse is that they don’t have the opportunity to go into that debt. Society is going to start feeling the crunch not only of credit but lack of qualified people running the show. It’s already happening in politics!

By: Think Money Blog

Think Money Blog — Thu, 28 Aug 2008 16:12:22 +0000

As far as I know in the UK student loans are funded by a “not for profit” company – which is regulated by the government.. so I’m guessing we should be okay!