Student Consolidation Loans

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Author:
Mark Woodcock

Earning a college degree is one of the most important - and expensive - things you will do in your life. If you are able to attend college without having to take out any student loans, you are one of the lucky few. Most individuals have to borrow at least some of the money they need for tuition, books, and living expenses. And upon graduation, you are faced with the challenge of repaying all of those loans after the grace period ends, whether you are employed or not. That can be a hard dose of reality when you realize that not paying your loan payments on time, or not paying them at all can have grave consequences where your credit rating is concerned. That is why it is smart to consider a federal student loan consolidation program.

Loan consolidation entails taking out a single loan in order to pay off several others. This is done for convenience, as you can often get a lower interest rate, and you only have 1 monthly loan payment to keep track of. It is also good for your credit history. Often, student loans are guaranteed by the United States government. With a federal student loan consolidation program, currently held loans are purchased and closed either by a loan consolidation company or by the U.S. government. Who handles the loans depends upon what type of federal loans the borrower has.

The interest rates for Federal student loan consolidation programs are very reasonable. They are lower than your average bank loan. They are calculated based on the current year's student loan interest rate, and in turn calculated based on the 91-day Treasury bill (a government bond used as a debt-financing vehicle of the U.S. Federal government) rate at the previous auction (held every year in may) of the year. The interest of student loans are variable, but can not go over the maximum of 8.25% for Stafford Loans and 9% for PLUS loans (Federal parent loans).

Student loan consolidation programs are available to former students who have more than a minimum amount of federal student loan debt (usually more than about $10,000). Parents with more than a minimum amount in PLUS loan debt are also eligible to consolidate.

If an individual chooses to consolidate his or her federal student loans, the loans can be consolidated through a private lender, and the borrower can only consolidate again through the U.S. Department of Education. Upon consolidation, the loan is charged a fixed interest rate that does not change even if the loan is reconsolidated. And, with a federal student loan consolidation program, there are no fees applied or closing costs to be paid. This differs from private lender debt consolidation.

Taking advantage of a federal student loan consolidation program can be beneficial to your credit history, by helping it stay clean. It is easier to keep track of and remit 1 monthly loan payment than to keep track of 2 or more student loan debts, especially if you move frequently. And losing track of a federal loan is never a good idea.

Loan consolidation is especially good if you are having trouble making all of your scheduled loan payments on time. Defaulting on your student loans is a very unfortunate situation to be in, and can lead to having property and possessions taken from you in order to pay the debt. You can also consider requesting loan forbearance from your lender, which allows you to take a break from your payments, or make interest-only payments. However, the longer you wait to pay your debt, the longer it will be hanging over your head. With consolidation, repayment is extended over a longer period of time which, in addition to the single lower interest rate you will have on your loan, they payment are lower and more manageable within your budget.

If you are interested in a student loan consolidation program, you can consult the U.S. Department of Education, or one of the lenders with whom you currently have a student loan for information. During the application process, you can learn exactly which of your loans qualify for consolidation (hopefully they all do!), and be on your way to more manageable student loan payments.

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Learn the essential information for picking the right consolidation service at Student Loan Consolidation Program

A Quick Note From The Publisher... If you like the article above, you may be interested in the following article which is also related to Student Loans... Should You Consolidate Student Loans? Students can consolidate student loans to relieve the pressure of having multiple loans, large monthly payments and higher interest rates. Are you struggling to repay your student loans? Well, you are not alone. Many students and graduates that have student loans look to consolidation in order to make them more manageable. Consolidating your student loans can be a good idea under certain circumstances. Currently, interest rates have been low but they are in fact rising. And economists tend to agree that they will continue to rise. Most student loans are based on a variable interest rate and will not be locked-in until you refinance or get a loan consolidation. The option to consolidate student loans is available to those individuals who have established good credit by paying their loans back on time. If you have missed payments or have been late then you will probably not receive the lowest interest rate but it may still make financial sense to consolidate. As a rule, loan consolidation rates are usually offered at 1 or 2 points below what your current rate is. This makes the loan more attractive and is an incentive by the lender to draw in your business. You will save each month because of the lower interest rates but it is also tempting to reduce your monthly payments and extend the life of the loan. But that can have consequences. What was a 5 year loan can turn into a 10 year loan. You can avoid this by paying off as much of the principal as possible. This will shorten the life of the loan and the amount of interest that you pay. This is ideal in the best of circumstances but for those times when money is tight you can arrange with the lender to reduce your monthly payments, even to the minimum. Student loans are like every other type of bank loan. You...