Loan Consolidation Student Loans
In the
Student Loan Consolidation
Consolidation Loans combine several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. It is very similar to refinancing a mortgage. Consolidation loans are available for most federal loans, including FFELP (
Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same. (For the mathematically inclined, there is a slight difference due to the different shapes of amortization curves at each interest rate. In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. So using a weighted average yields a very small reduction in the monthly payment (in this case, 7 cents) and in the total interest paid ($8.68) due to a kind of triangle law. Of course, when you consolidate the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, yielding a slight increase. So you pay a tiny bit of a premium for consolidation, due to the rounding up of the interest rate. The PLUS loan interest rate loophole can reduce the interest rate on 8.5% fixed rate PLUS loans by 0.25% through consolidation. If you were deferring the interest on an unsubsidized Stafford Loan by capitalizing it, most lenders will add the capitalized interest to principal when you consolidate. (Lenders can capitalize interest at most quarterly, but most capitalize it once when the loans enter repayment or at other loan status changes.) No Cost to Consolidate Aside from a slight increase in the interest rate on the consolidation loan, there is no cost to consolidate your loans. There are no fees to consolidate. Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the
There is never an up front fee. If someone wants you to pay an up front fee, chances are that it is an example of an advance fee loan scam. Who Can Consolidate Both student and parent borrowers can consolidate their education loans. (Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.) Married students are no longer able to consolidate their loans together. This provision was repealed effective
Lenders are, however, able to discriminate on the basis of the amount of the loans being consolidated, so lenders can set a minimum balance on the loans.) Which Loans Can be Consolidated? Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan. You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself. These restrictions have been in effect since early 2006. Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan. Consolidation does not pierce the veil on previous consolidations. The new restrictions on consolidating a consolidation loan limit your ability to use consolidation to switch lenders. Generally, you will consolidate your loans once, toward the end of the grace period or after the loans enter repayment, and then be locked into that lender for the lifetime of the loan. If you want to preserve your ability to use consolidation in the future to switch lenders, you should exclude one of your loans from the consolidation. Repayment Plans Consolidation loans provide access to several alternate repayment plans besides standard ten-year repayment. These include extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only). If you do not specify the repayment terms, you will receive standard ten-year repayment. Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from
The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease. You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan. See our caveat about extended repayment below. Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for an deferment or forbearance. Federal education loans, including consolidation loans, do not have a prepayment penalty. So you can pay off all or part of your federal education loans without incurring a penalty. If you want to take advantage of this, be sure to include a letter with the extra payment indicating that it should be applied to reducing your principal. Otherwise, the lender may treat it as an advance payment of the next month's monthly payment. Tools for Evaluating Consolidation Options FinAid's Loan Consolidation Calculator can help you understand the tradeoffs of consolidating your loans. It compares the reduction in the monthly loan payment with the increase in the total interest paid over the lifetime of the loan. It also shows you the interest rate on your consolidation loan. Despite the switch to fixed interest rates on
Government Student Loan Consolidation
It is often said that education is the best investment that one can make in one’s life. Although there are various student loan options but repaying them can be a tough task. However, government student loan consolidation is a reasonable option as compared to private loan offers. Many people are reluctant to take student loans because of the high interest payment. Government Student Loan Consolidation Eligibility Government Student Loan Consolidation can be applied by any student that have taken federal loans. Some of the requirements that must be considered are that the student should have taken more than one federal student loan. Also, a student should have a good credit rating or should be in the grace period of a post graduation course. To make payment easier for students, both unsubsidized and subsidized student loans can be consolidated. This enables a student to pay only one payment per month. Government Student Loan Consolidation Benefits Government Student Loan Consolidation allows students to pay loans over a longer period of time as compared to private student consolidation loans. As a result students are required to pay only a small amount per month. The interest rate, total loan amount and repayment duration determine the monthly payment cost. Maximum repayment duration can extend up to 30 years. It is advisable that a student should try to pay quickly as the interest rate along with the principal sum adds up to be a significant amount over time. Some of the benefits of government student loan consolidation include low payments, low interest rate and easy payment method. With the loan, a student is not required to pay any of his previous loans and instead is required to pay only a single monthly installment. Moreover, the interest rate currently is at the lowest levels, and thus it is the best time to take student consolidation loans.
Student Loan Consolidation and Bad Credit
People with multiple student loans from college often want to consolidate, but they fear it would hurt their credit rating. Most people are very unsure about the relationship between student loan consolidation and bad credit. Whether or not consolidation is a smart financial move for you really depends on your situation. Because of the complex web of possibly repayment plans and the formula that determines federal consolidation loans' interest rates, there is no one-size-fits all answer. Sometimes it saves you money and sometimes it doesn’t. Even if it doesn't, paying more in order to secure a lower monthly payment makes sense for some people and not for others. It's a highly personal decision. If you do decide that consolidation is a step you want to take, you might be worried about its impact on your credit. Will consolidation put a black mark on your credit report? And if so, how big will it be? Well, rest assured, because consolidating your student loans will not hurt your credit. Credit bureaus classify debt in two ways: good debt and bad debt. Credit card debt, for example, is bad debt. It will lead to nowhere but more debt. Student loan debt, on the other hand, is good debt. You are borrowing money so that you can get a better job and make more money in the future. You are going in to debt only to better yourself. What's more, consolidation might even increase your credit score. Let's say you have eight student loans. That lists as eight separate creditors on your credit report, and eight separate accounts for which you are all in the hole. But when you consolidate them, it rolls them up into a single loan. Now your credit report reads that you have just one creditor, and your credit has accordingly gone up. Also, having a lower monthly payment to make also lowers your score. Credit bureaus weigh your current income against the amount of payments you need to make monthly. If you are paying off several student loans and it adds up to a substantial chunk of your income, your credit will be lower. But getting a lower monthly payment and freeing up some of your income can raise your credit as well. When determining your credit score, bureaus also look at the open lines of credit you have that are currently being used, as opposed to ones that aren't. If you have eight loans and are paying on all of them, they are all considered open lines of credit that are being used. But if you have just one consolidation loan, your credit report only lists one line of credit that is being used. One line of credit versus eight can mean a significantly higher score. So there is no need to be concerned that there is a relationship between student loan consolidation and bad credit. On the contrary, it actually causes your credit rating to improve most of the time. So if you think consolidation might be the best thing for you, go for it. Your wallet (and your credit rating) will thank you. About the Author Student consolidation loan and bad credit do not seem that your financial outlook for reducing payments would be very high but it is possible. For more on this and how you can find consolidating your student loans can save you a ton of money, then visit Student Consolidation Loan 101
Guide For Student Loan Consolidation Advice
Students, who cannot afford their monthly payments, can now make their debt repayments more manageable through student loan consolidation. Banks and several financial organizations are offering attractive packages to students who are willing to get their loans consolidated. Mentioned below are some important points that need to be remembered while opting for a student loan consolidation. 1. Calculation of interest rates on student loans occurs in accordance with the 91-day Treasury Bill auction. Thus, determined interest rates are applicable from July 1 through June 30 of each year. It is always better to wait until July 1 to determine whether or not to consolidate the student loan as interest rates can increase or decrease. 2. Lenders often take more than a month time to approve a loan application. If the approval date goes beyond July 1, one needs to make monthly payments according to the restructured interest rates that might either increase or decrease. Hence, it is always important to plan properly before filing an application. 3. Consolidating a student loan as a married couple can be advantageous because one can obtain a higher amount as a loan.
However, both the husband and wife are responsible for repayment of the loan, even if they get divorced in the future. 4. Student loan consolidation does not require the lender to make any credit checks. Interest rates are also not dependant on the credit record of the customer. 5. It is important to shop around and compare offers from different lenders so as to avail the best deal. One good way is to contact any reputed online lenders since online lenders quote a lower interest rate in comparison to brick and mortar lenders. Some lenders even offer certain attractive offers such as reducing the interest rate by 0.25 percent if the monthly payments are made electronically or a 0.5 percent reduction after a few years of continuous and timely payments. It is worthwhile to check such offers. About Author: Pauline Go is an online leading expert in finance industry. She also offers top quality financial tips like:
What Are The Advantages Of Student Loan Consolidation?
In order to make simple the payment of federal student loans, it is highly advisable that you consider consolidating your loans - this is done by combining all the different types of loans you incurred. Doing so has many advantages. One is that federal student loan interest rates are currently at their lowest, so consolidating your loan means that the interest rate used for the whole duration of your loan is fixed. One category you could take into consideration regarding federal student loans is availing of the FFEL student consolidation loan.
This loan program helps any borrower especially students via multiple repayment schedules. Thanks to the FFEL student loan consolidation program, only one payment is made each month. Through the FFEL program, the loan consolidation you will be acquiring will be made by a commercial lender, after which credit bureaus will tell you that you already have a zero balance in your account, after doing so you will then sign a fresh promissory note indicating that you will have a new interest rate and schedule of repayment. However, in order to avail of the FFEL consolidation loan, you must currently be in repayment on the loan you defaulted or that you have been able to make at least three voluntary and on time monthly payments in full. Disadvantages of availing student loan consolidations, if there are any, actually depends on you. If in case it would take you a bit of a longer time in paying off your student loan, you will then consequently pay more interest during the course of your whole loan repayment. However, since in consolidating your loans, there are really no penalties in prepayment and if you continually pay the same amount payments before actually consolidating your loans, the interest you will incur would not increase thus you will be able to pay the loan faster than when you did not consolidate your loans. Another advantage when one avails of student loan consolidation is that there are no fees or charges incurred. The United States Department of Education does not in any way make charges or collects any fees to any borrower who avails of the student loan consolidation. Refinancing student loans again depends on the borrower. The United States Department of Education does not in any way allow any borrower to refinance a student loan consolidation. But if in case a borrower has an additional federal loan that is not originally included in the loan consolidation, these debts may then be added and calculated again into a another Federal Consolidation Loan. Student loan consolidation has another advantage. A borrower is still entitled to avail of the same Federal benefits. This is because student loan consolidation is a federal program. And being it a federal program, a borrower is more than welcome and is entitled to various benefits such as deferment, interest that is tax deductible and forbearance. Plus, the loan is guaranteed by the government and is insured federally. The following is a basic list of 8 student loans that are eligible to be consolidated. 1. SS - Subsidized Federal
(Gifted learners) Is Student Loan Consolidation on Private Loans Really An Option?
Private student loans are credit-based and have more attractive repayment terms as well as interest rates. It can really help in saving money every month unlike the Federal student loans. Private student loan consolidation is simply the process of refinancing and combining private student loans into a single debt only. It may result to a lower monthly loan payments thus will also lessen your worries about your multiple loans. The very main essence of a private student loan consolidation is to lessen the monthly payment of students who have multiple loans. By getting quotes from various lenders, a student can have knowledge about how to get the best deal with all the prevailing market rates present nowadays. Furthermore, private student loan consolidation can result to an extended loan payment. This gives the student borrowers enough time to pay their loans with fewer burdens. These beneficial advantages offered by the private student loan consolidation are not possible if students have several loans to handle. There are various private student loan consolidation companies which offer more benefits. One of these is the interest rate reduction which can result to lower loan monthly payments to think of. The options for the loan repayment procedures depend upon the qualifications being required by a particular lending company. Thus, it is also the work of the lending company to choose the best private student loan consolidation program suitable for a particular student loaner. Indeed, private student loan consolidation brings various benefits. However, one should still be aware of some situations like the drawbacks of having a private student loan consolidated. Student loans are indeed a very big help for students who are deeply in need of some financial aids. However , all students who have decided to avail of a particular student loan should bear in mind the responsibility in repaying the borrowed amount of money. In fact, there are so many ways on how to pay off student loans. The very first thing to do is to develop a plan on how to pay off student loans. Second is to look for a summer jobs or internships to be able to save a lot of money and not waste your valuable time. Part-time jobs will also do to help pay a loan. Also, take into consideration to consolidate current student loans to have lower interest rates. Furthermore, one should perform volunteer works like teaching, medical works or even military works to reduce at least somehow a debt. It would also be good to apply for some grants and scholarships while in school to lessen the burden. And lastly, take good care of the credits. Late payments should be avoided to have a good credit score. It is important to pay off private student loans as quickly as possible. Sometimes, early paying off of the loan will lessen the burden along with a particular student loan. To make paying off easy, one can start paying off first the non-subsidized loans for it has an obligatory interest. Also, if one has several loans already, paying off first the smallest loan would be much better. Just always remember to always do the best in paying off student loans. Be a responsible student loaner! Failing to pay off student loans can stick with you for decades. You can’t go bankrupt on student loans so don’t count on that as saving you down the road!
Government Student Loan Consolidation
A government student loan consolidation is a fixed-rate loan that combines multiple student financial credits. For graduates with multiple credits, the opportunity to consolidate to one payment offers the recent graduate a blessing. Upon spending a number of years being educated, the recent graduate begins searching for a job that he or she has been preparing to obtain. Finding a good paying job can often take a little time. Even though the graduate has a 6-month grace period before payments on the debt need to begin, money is usually tight. The government student loan consolidation, along with the 6-month grace period, offers a recent graduate an opportunity to breathe easier and find stress relief. In order to qualify for a government student loan consolidation the consolidator needs to meet a few eligibility requirements. The first prerequisite requires a potential consolidator to have more than one government student loan, also referred to as a federal student loan. The borrower must also be in good favor with the lenders. At least three payments should have been made, or the borrower should still be within the first 6-months grace period. Consolidation can occur with various options like subsidized and unsubsidized.
While the two types can be combined and allow the borrower to have one payment, the lender will keep the two types separated for better management purposes. After the combination of all financial credits for the borrower, the lender is responsible for making payments for each advance. Thus, consolidation occurs. The government student loan consolidation may also incorporate private financial advances into the consolidation, but many financial advisors warn against such incorporation. When private and individual lender amounts incorporate with federal loans, the combination will cause the benefits originally associated with the private and individual lends to vanish. Some feel that the combination is worth the risk and the combination offers better benefits than originally associated with the financial advances. About four options are available for borrowers to choose from concerning repayment. The options surrounding the government student loan consolidation have a number of advantages and disadvantages. The advantages range from no fees for the consolidating process to the simplicity of the application process. Since borrowers are already paying a premium dollar amount for an education, the government offers students a break by not charging a fee for the application process and by offering lower interest rates. In view of the fact that most processes offer a stretched out payment period for up to 30 years, the smaller monthly payment offers recent graduates a sort of payment debt relief. The stretched out loan period and low interest rates can save a payee up to 53% in each month's payment. The government student loan consolidation offers low locked-in-rates, which presents additional savings to a student since interest rates tend to fluctuate and rise. As with most debt settlements found after college, government options provide a graduate with other benefits that include deferment of payment, if unforeseen problems arise, and forbearance options associated with deferments. Disadvantages appear with a fusion of debt as well. Sometimes combining debt can lead to larger financial obligations. A consolidation may also lead to higher interest rates. A borrower must be aware of the amount of his or her financial obligations. Higher interest rates can happen depending on the types and dollar amounts involved and may vary depending on what previous rates were. The government student loan consolidation gives a borrower lower monthly payments because the payments extend over a long period. Because of the stretch in time, more interest is paid. When payments are made as scheduled, more money is paid, in the end, than originally borrowed. However, if a borrower has already made payments and has paid a large portion of the bill, a fusion of the financial debts may not be advantageous. Many consolidators now also require a certain dollar amount before a merging of financial debts is considered. So, if a student has several loans but the total amount is small, an application is sometimes rejected. In today's society, more people are aware of and try to establish a good credit report. As a result, a graduate may make a wise decision in consolidation. No credit check transpires in applying for a federal consolidation program. In using government student loan consolidation, the graduate is helping his or her credit rating! Most graduates have up to eight different financial advances or more. Each financial lend is considered a debt and is looked at with negativity. When debt fusion occurs, the multiple debts look paid and only one outstanding bill remains. In the eyes of other creditors and even potential employers, the fewer debts a person has, the better. A larger benefit associated with credit checks and scores rests in early payoff methods. If a borrower can pay off the balance ahead of schedule, no penalty is placed on the person. An early payoff is a huge incentive for applying for federal consolidation. A person can have lower payments on their college bill upon graduation and have the opportunity to make larger payments or an early pay off when money is sometimes more plentiful. However, if an early payoff is desired, a person must plan and budget accordingly. Even making an extra payment or paying an extra portion each month can decrease a loan more quickly. "When thou shalt vow a vow unto the Lord thy God, thou shalt not slack to pay it: for the Lord thy God will surely require it of thee..." (Deuteronomy 23:21).
What is the Best Student Loan Consolidation Rate for You?
So how do you acquire a consolidation loan with the best rate? There are several types of loans that you should consider. For example you can apply for a loan with the consolidation fixed loan rate student rate. Fixed rate means that you will be paying the same interest rate until you pay off the loan. If the economic indicators change, you still have the same consolidation interest loan rate. Your rate will not depend on inflation.
There will, however, be conditions when the bank will be allowed to change your fixed rate. Lets say, if you default on one or more of your payments, this can cause the student loan consolidation rate to increase. You can also apply for a loan with the variable (or adjustable) student loan consolidation rate. This means that your consolidation loan low rate student rate will change depending on the current economic conditions. If average interest rates in the economy increase, so will your rate. On the other hand, if the average rates are going down, your rates will decrease too. It is up to you to decide which rate – variable or fixed – will provide you with the consolidation loan lowest rate student interest rate. Different economic conditions will call for different selections. It is important to understand that whether you are applying for the consolidation student loan, quick settlement loan online or other type of loan, you should always focus on reducing the student loan consolidation rate or some other type of interest rate.
Facts on consolidation of student loans
Chances are if you take on student loans to finance your studies you have been, or at least will receive calls and offers by mail to consolidate your student loans. There are indeed many advantages to consolidate your student loans. In addition to gaining a fixed interest rate, you can also potentially reduce your monthly payments. In case you start to experience financial difficulties, you May also be able to take advantage of flexible payment options with a student loan. Unlike other types of debt consolidation student loan consolidation gives you the opportunity to combine your loans into one package more attractive. You can also do not have to worry about being rejected because of a bad credit rating and interest on the loan May be tax deductible. In addition, in the event of your death your survivors will not have to worry about paying back because the debt will be discharged.
If you have a variable interest rate on student loans, consolidation loan can also help block a lower rate before the rate hike next year. Over the duration of the loan, this step can actually help you save a huge sum of money. Of course, in addition to the benefits there are also disadvantages that you should be aware. One of the most important things is that if you end up lowering your monthly payment you are actually extending the duration of the loan and that means you pay more over the term of the loan by additional d 'interest. You can still enjoy other benefits of consolidation loans for students without this drawback, however. It just does not reduce your payments unless it is really necessary. In reviewing the donors for a student loan consolidation, it is important to always compare the conditions of each offer made for you. Consider the interest rate and length of repayment terms to ensure you get the best deal possible. If you have a mixture of both federal and private student loans, you should also note that if both types of loans are available to be consolidated May it not be a good idea to consolidate your federal loans and private loans in the same package. There are provisions on private loans that are not required on federal student loans, for example, deferrals, tax deductions on interest, no forgiveness of debt for death and no forgiveness for the loan work in some areas. In the case of a mixture of private and federal governments, it is generally advisable to go ahead and consolidate private loans separately by the Confederation of loans so that you can retain benefits for federal loans . By understanding all factors related to the consolidation of student loans, you'll be in a better position to take a more informed decision regarding your finances.
Some facts on consolidation of student loans
With the increased demand for better education, college and school fees have also increased. As a result, most students have huge student loans when they finish their studies. Most federal education loans offers an option that May reduce the burden of student loans. The consolidation loans are criteria: 1) government-subsidized student loan. 2) non-government subsidized student loans. 3) Loans federal nursing. 4) The federal Perkins loans. 5) Health of aid loans to students. Always keep in mind that the private sector student loans are not covered by this criterion. Government consolidation of student loans, you can combine all federal student loans with a monthly payment. A monthly payment after the consolidation loan student government to lower the funds needed less than 15 years or 20 years of repayment option.
Process consolidation of government loans to students: To request a government student loan consolidation you must complete an application form and communicate with the lender. To apply for a consolidation, you can use online provided by your borrower or you can request an application form by phone if your borrower does not provide online installation. After receiving your completed application, the lender will request information from your other donors. Then, the borrower will receive notification of loan consolidation, normal consumption of information and the amount owed. Also take into account the cost Consolidation is simply an option to repay loans, which reduces your monthly repayment but mostly it increases the total amount to be refunded because it increases the time until the period of 30 years, which allows you more time to pay the same amount. Thus, you should compare your refund consolidated with a non-which is a big difference, you need to know any other option to solve your problem. Confirm if you lose reductions in interest rates, loan discount or cancellation of benefits.