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Is It Always A Good Idea To Consolidate Student Loans?

Most of college students will graduate with a debt amount starting around $20,000. They usually have taken loans from different lenders with high fluctuating interest rates. When you need to have the many loans consolidated, these loans are bundled together by the student loan consolidation company and paid off.

The student then pays the new lender at a new interest rate, which is usually the average of all the interest rates previously taken out. The time period is also longer and students have different options of repayment. Thus, student loan consolidation saves money, makes life easier and you only have one loan to pay off.

Where Is A Creditable Student Loan Consolidation Company To Work With?

Check with school financial counselors, telephone books and one of the best places to start with is the Internet. In fact, this is my favorite place to start. Check out, student debt consolidation programs, (a great one) and others in the same area.

Questions you need to ask of them are:

• Do they explain all the charges and not ask for any upfront fees?

• Do they offer different types of payment options?

• Do they answer all of your questions and patiently hear you out?

• Do they have a competent student loan consolidation counselor to guide you?

• Do they let you take all the time you need without pressure before signing any papers?

• Do they offer any special bonus or special discounts?

• Does the association of independent consumer credit counseling agencies to consolidate your loan properly accredit them?

If all of these questions are yes, then you have discovered a good student debt consolidation company. However, don’t just take their word, be sure to check on other offers in the same market. And crosscheck with the “Better Business Bureau” for their track record.

If you feel uncomfortable with a particular company, walk out. There are many student loan consolidation companies offering ”no cost” student loan consolidations, but do not be lured by them. You could end up paying more. Also, make sure that the company you go with does not penalize you for early repayment of your loan.

Additional Information That Might Be Helpful Regarding Loan Consolidating.

Who is eligible for student loan consolidation? You must have more than $10,000 in outstanding student loans. And you are not required to be employed, to have any collateral nor need a co-signer.

Are there any fees when I consolidate? No, there are no fees. Is there a credit check required to consolidate? No, there is no credit check. And consolidation will improve your credit rating due to one lower payment to pay now.

Do I continue to make my loan payments while waiting for my consolidation application to be completed? YES!!! Until you are notified that your loans have meet all of the requirements (this can take anywhere from 30 – 90 days) keep making payments on all of your old loans.

One of the most asked questions is what about a repayment guideline. Depending on the total amount of your consolidation loan (and this is for a government loan) the following repayment periods are:

Loans Balance Repayment Period

• $10,000 -$19,999.99 15 years

• $20,000-$39,999.99 20 years

• $40,000-$59,999.99 25 years

• $60,000 and above 30 years

Hopefully some of these points will help you out while approaching student loan consolidation companies. At least some of your problems will be condensed when you are finished.

What Does It Mean To Consolidate Student Loans?

Consolidation of student loans means to combine several student or parent loans into one larger loan from a single lender, which is then used to pay off the balances of the other loans. It is very similar to refinancing a mortgage of a home, or guaranteed personal loans.

Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct Loans. And some lenders offer private consolidation loans for private education loans as well.

If you have decided that your monthly payments for your student loans have become unmanageable and you need help, you might then consider consolidating. If you are facing deferment and forbearance options, and/or want to avoid default on your student loans, then perhaps it is time to consider consolidating these loans for your protection and ease in life.

How Do I Begin To Consolidate My Loans?

By consolidating your federal student loans, you can obtain valuable money saving benefits and can lower monthly payments. Make sure that you understand what is being offered including any “strings attached” especially. This kind of transaction can save you money and is easy to understand, usually.

It is a good idea to check with each of your lenders. One hallmark of a great lender is one that offers you attractive money saving benefits and that also includes details as to when it becomes time to consolidate. Make sure that you review the complete application including all the detailed information on your loans before signing.

It is understandable that many of your loan details can be confusing, which is why the extra effort on your part or the lender you go with is necessary. The best lender will help you review and complete your application, and help you understand before signing. Your personal information is private and make sure your lender feels the same way.

All of the above information is important that is why I keep referring to talking and obtaining the “best” lender for you. One perhaps that you used for one of your prior loans or a new one who works only with consolidation of loans. Talk, interview, and talk again until you form a trust with that one person.

The Change In Interest Rates

The interest rate on a consolidation loan is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped off at 8.25 percent.

Now if your have several loans with different interest rates, the weighted average will be somewhere in between. The weighted average does not fundamentally alter the underlying cost of the loan. It keeps the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance.

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 present interest rates. However, it is also higher than the lowest of your interest rates. For all of the interest rate will be combined (the high and the low).

Due to the equaling out of the multi interest rates, most important, the amount of the interest you pay over the lifetime of the loan will be about the same. And this perhaps is the most important news of all.

There are some ways that you could potentially cut down on your student loans even before you leave school which many students do not even take the time to consider while they are pounding the books for A’s. It might require you to be creative with your student loan and how you handle your payments.

Don’t Be A Lemming With Debt

According to a study given by the National Post-Secondary Financial study the results showed that nearly two-thirds of college students struggle to pay loans and they unfortunately graduate with a bachelor’s degree and student loan debt of some kind. For undergraduates with federal student loans the average debt is nearly $20,000 coming out of school.

That is a lot of money that could buy you a nice new car or maybe a down payment on a house. Even after you find a student loan opportunity and even if you take it be willing to look for other opportunities out there for loan consolidation. There are going to be times during your 4 years at school where a better deal may pop up and give you better rates and easier payments.

Study For The Right Debt

There are plenty of private and non-profit student loans out there that are willing to offer loan consolidation that could save your skin when it comes to a loan. Many federal student loans have to deal with increasing interest rates. That translates only to more money coming out of the student’s pocket and more payments long term.

The last thing you want to do is worry about more bills along with utilities, rent or a mortgage, car payments, saving for a family of your own, and countless other things that come up. I studied my bills yesterday and I was shocked to see all of the random payments that you don’t account for.

Student loan consolidation could help you make larger payments with fix rates and get closer to attacking the principle. Where many students it could take 20-30 years, you may be able to get it done in 10 years or maybe even shorter. Just think to yourself what type of relief that will give you when you don’t have to worry about a long term debt like that any more.

Where To Go To Consolidate

Consolidating student loans can be done through the Federal Family Education Loan Program also know as the FFEL, along with banks, secondary markets, credit unions, and plenty of other lenders will provide those same benefits. These are all worthy options for you to take a look at during your four years in school. I know that is difficult for many of you because the last thing that you want to do is more reading, but I promise you that it will save you a lot of money down the road and create more freedom long term.

You will actually find out that many federal education loans are capable of being consolidated whether they are subsidized or not. Some of these include Stafford Loans, Perkins Loans, and Federal Nursing Loans. Whatever loan you may have, make sure to check your commitments or covenants in the contract.

This is going to be a simple start to defining what consolidation is and how it is done to help out with the financial situations of many students and former students out there. These terms will be important for any person to understand as you go through this web site.

Debt consolidation-

This means taking out a loan to pay off several other loans. The intention behind this is to secure a lower interest rate or to establish a fixed interest rate that otherwise may not have existed before. Some loans that are consolidated from several to one, really have the exact same rates, but the intention is to save time by focusing on just one loan instead of trying to pay off several loans. Debt consolidation can be transferred from several unsecured loans to an unsecured loan of some kind, but more often it is transferred to a secured loan.

Secured Loans-

The borrower pledges some asset like a car or property as collateral for the loan. If the borrower defaults (not able to pay the loan) then the debt may be satisfied by the lender taking possession of the object and by selling off the collateral to pay for the debt. This is legally done under the Bundle of Rights laws for property ownership.

Unsecured Loans-

This is simply any type of a loan where there isn’t collateral required in return for a loan in case the borrower was to default. These are often more difficult to get and require impressive credit to do so.

Collateral-

An object such as a car or a house that a creditor can repossess in case the borrower fails to make a payment on a loan. The lender can use the collateral and sell it to erase the debt or just simply keep it for their purposes. This portion of a loan contract may create a lower interest rate.

Default-

This is where the debtor has violated some form of the contract of the loan by not making a payment or violating some other condition in the terms. If they are simply unable or unwilling to pay the debt then the whole debt may be immediately required to be paid off and the creditor could take possession of any collateral.

Federal Student Loans-

The Federal Family Education Loan Program and the Federal Direct Student Loan Program consolidate loans from Stafford Loans, PLUS Loans, and Federal Perkins Loans into one single debt to pay off. This means reduced monthly repayments, a longer term for the loan, and this will have a fixed interest rate. In essence this buys you more time and you have to spend less money initially.

These will be 10-30 year terms, and yes you will pay less initially, but eventually you will pay more down the road because of interest. The interest weight is calculated as the weighted average interest rates of the other loans being consolidated. These weights are rounded up to the nearest .125% and capped at 8.25%. This gives companies a more accurate average to the amount of the loans compared to the interest rates.