The high cost of college tuition makes it necessary for most students to obtain a loan in order to pay for their education. There are two general types of loans, federal and private. Stafford loans are low interest federal loans given to people with little or no credit history. The government also offers subsidized Stafford loans, whereby they pay the accrued interest while the student is in school. Private loans are obtained from other sources. As a result, the interest rates and repayment terms differ from federal loans and are generally not as generous.

When many students graduate, they are faced with a variety of tough choices that must be made in relative short order. For those that choose to work, they will have to begin paying back their student loans. Unfortunately, too many people find themselves in less than desirable financial situations that prevent them from meeting their loan obligations in a consistent and/or timely fashion. However, as long they do not default on the loan, consolidation is an available option.

Loan consolidation is the act of combining all outstanding loans into a single low interest loan with one monthly payment. The primary reason most people seek student loan consolidation is debt relief, usually because their terms are too demanding. For those with federal loans that want to consolidate their student loans, the repayment schedule is extended up to thirty years. Since the loans are initially obtained at a low interest rate, consolidation often equals substantive savings. Although private loans cannot be consolidated with federal loans, there are options available that can garner favorable terms.

Unless the borrower’s credit score has improved since they initially obtained the loan, it is often hard to attain low interest rates. Yet, there still some avenues that can be pursued. For instance, a fixed rate home equity can be used to pay back the private loan. Some traditional educational lenders are willing to consolidate private loans. However, the lender dictates the interest rates. While some rates are lower than others are, acquiring the loan at a fixed rate is essential. In addition, if a borrower attempts to consolidate a private loan with a federal loan, they will forfeit all the privileges of the federal terms.

If a loan is obtained from the federal government, there will be no problem securing low interest rate student loan consolidation. While private loans present a distinct set of requirements, there are still feasible ways to get the loan consolidated. It is important to understand loan terms and consolidation choices before obtaining a loan.

Earning a higher education is great; paying off the loans used to acquire it isn’t. Many students find themselves with a fresh degree and a mountain of student loan debt. If you’re like a lot of students, you probably received a combination of federal and private loans to pay for your education. Now that school is over, those lenders are knocking down your door requesting payment. Keeping track of them all isn’t easy; different loan payments are due on different days, with different minimums and other requirements. By finding the best student loan consolidation, you can simplify your life and make paying back your student loans easier.

Reasons To Consolidate Student Loans

Before looking for a student loan consolidation, figure out what you hope to gain from one. Do you need one to lower your monthly payments, or to reduce the amount of time that it takes to pay off those loans? Either one of these goals is achievable, depending on the kind of deal that you get. Although you can receive a student loan consolidation from any lender, it is in your best interests to consider going through a federal student loan consolidation program.

Government Consolidation Loans

In most cases, the best student loan consolidations are those offered by the government. There are two main options in this regard: the William D. Ford Federal Direct Loan Program and the FFELP (Federal Family Education Loan Program). It is important to keep in mind that you cannot consolidate your student loans while you are still in school, and that these two primary government consolidation programs can only be put to use during your loans’ grace periods or once their monthly payments have kicked in. Parents of students are excluded from this requirement and may consolidate loans at any time.

Save Money Repaying Your Student Loans

The best student loan consolidation programs can shave considerable amounts of interest off your loans – in some cases, they can even reduce the principal balance. In addition to saving on these payments, you should look for consolidation loans that offer discounts for auto paying your monthly bill. Many consolidation plans offer considerable discounts to people who have their monthly payment automatically deducted from their checking or savings. It’s just one more way to reduce the amount you owe on your student loans, allowing you to pay them off faster and for a lot less money.

Know Your Repayment Option Before Taking Out A Loan

It is important to evaluate your loan options and understand your loan repayment terms before signing any agreement to accept a loan. Repayment requirements will differ depending on the type of loan and your total debt.

It would be wise to learn all that you can about how financial aid and your loan options work by attending a local financial aid event. It is your responsibility to learn how to calculate or estimate your monthly payment. You should talk with your loan officer, know exactly when the first payment begins and have a backup program if your present plan does not work.

Also, the repayment options on the different loans you might be considering may be the reason why you chose the loan that you do. One repayment plan might be more lenient or easier to work with than another. Just be sure to read and understand this area (repayment) before signing any final paper work.

Are There Different Types of Loan Repayments?

Loan repayment usually starts after you graduate. If you drop out of school, attend school less than half-time, or if you suspend your studies beyond the grace period, you will be required to start repaying your student loan.

Once you begin borrowing, interest starts to accrue on our loan. Except for subsidized loans, the accrued interest is added to your loan balance once you start repaying the loan. This increases the full balance you must repay. To reduce your balance, try to start repaying your loan before you graduate or at least make payments on the interest.

However, most lenders allow interest-only payments on a monthly, quarterly, or annual basis while borrowers are still in school. Lenders and servicers offer different repayment options. Check with your lender or servicer for details on repayment plans. Let’s look at several of them now.

The Standard Repayment is when the principal and interest payments are due each month throughout the loan repayment term. The Graduated Repayment is where payments are lower at the beginning and gradually increase over the term of the loan. The Income-Sensitive Repayment has the borrower make payments according to his monthly income for Stafford, PLUS and SMART LOAN, both of which are federal loans. 

Student Loan Consolidation is an important debt management tool that allows students to combine all loans into only having one payment. This can reduce the size of the monthly payments by extending the repayment period.

What Should I Do If I Begin To Have Problems Repaying My Loan?

Most students choose to consolidate their loans and/or other bills to reduce monthly payments. Here are some good steps to begin the process. Calculate your total amount of all bills. Gather your paper work and contact your lenders online or at your bank or credit union. Learn about their rates and terms for consolidation and then apply for the best loan with the lender of your choice.

Keep paying your bills until the consolidation is complete and you are notified. You then will have lower monthly payments by extending the repayment period of your bills. Make sure that you can make double payments, or additional payments when you are able to or if you wish, without any penalty.

Switch a monthly bill over to a lower interest rate and you will lower your payments. Try this with credit card promotions, department stores and even utility bills. Now that electricity companies have been deregulated, you can shop for a better deal. This means lower monthly payments for you and more for you to pay towards your school loan.

If you are a student and have just completed college, hopefully you have found a job in the profession of your choice. There are so many ways to curb spending or even get a part-time job just one or two nights per week. The sooner you pay things down and/or consolidate the more happier and freer you will be.

What it means to be in default on your student school loan.

You are in default on your student loan when you do not make payments on your loan for at least 270 days and your lender believes that you will not be making any more payments.

However, the repayment period would depend on the type of loan that the student has taken out. The time period after 90 to 120 days is called the delinquency period. Then the counting of the 270 days begins and at that time the default period begins.

According to the higher education act, the lender has a right to trace the borrower during the delinquency period. The longer the time period is without payment or communications to the lender the higher the penalty can become.

What are the consequences of being in default?

There are many consequences of being in default. And of course they are all negative.

• Bad credit reports
• Extra fees and interest that are added to the original loan amount
• Denial of new loans
• Refusal by your school to release transcripts
• Possible wage garnishment
• Seizure of tax refunds

If your lender cannot find you, the borrower, they will then hand the case over to a government agency. When the loan goes into default the maturity due date dissolves and the whole amount of the student loan becomes due immediately. The lender wants the monies returned and will now follow very strict procedures for collection.

The three steps the agency usually takes are, the treasury offset, (student will be deprived of income tax refunds), wage garnishment, (pretty self-explanatory) and the last one legal procedures.

What is the best way for you to handle the problem of having your loan in default?

Good, let us go there now. We have talked enough about the negative, yet reality aspects. There is hope and a way to get you out of this and to be riding high once again without feeling smothered.

First, the quickest way to resolve the default problem and say goodbye to this mess forever is to pay it off in full. To do this, just contact the holder of your loan for the current pay-off balance and the address of where to send the payment. Maybe you run into an unknown rich relative, obtain five jobs, etc.,

Second, loan consolidation helps you consolidate defaulted loans into a new loan. Contact your lender to discuss what type of consolidation loan would be best for your personal situation. This would create a new loan that you can keep in a CURRENT status by making your payment on time, each and every time.

Third, there is a rehabilitation program that can be of help to you. This curriculum was developed to help students resolve defaulted student loans through consistent payments. You would contact your guarantor to set up monthly payments that are manageable and that are made on time.

After nine payments have been made on time during these consecutive months, your loan is considered “rehabilitated.” And at this point it is taken out of default. The reports that were sent to the national credit bureaus are deleted. You will be given up to nine additional years to repay the loan while continuing to make your monthly payments.