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Student Loan Consolidation

By Exforsys | on January 14, 2007 |
Student Loans

Student Loan Consolidation

There are unquestionably many types of loans offered to college students to help finance their education. And sometimes managing these loans can become burdensome. One solution to help keep this in order is to consolidate it. Consolidation of student loans denotes combining various educational loans a student has drawn, to become one account paid monthly.

Type of Student Loan Consolidation

Loans are grouped into mainly two types, federal and private:

A. FEDERAL LOANS are those loans drawn out from government aid programs. This type of loan is usually easiest to avail of. Federal loans are offered to working students or those who are eligible for study grants. Any form of federal loan made by a student can be consolidated. This can be done while the student is still in school or six months after graduation. Loan consolidation may also be arranged during repayment negotiations.

B. PRIVATE LOANS are those loans drawn out from financial institutions like banks and credit companies. Private loans usually have higher rates than a federal loan and consolidation may not be immediately approved. Students also carry the responsibility of finding the right company to help them with their student loan consolidation.

Take note that non-federal student loans, or those drawn from credit unions or financial institutions and loans made for you through a family member, are not eligible for federal student loan consolidation. As private loans carry some sort of conditions or obligations not applicable to Federal Consolidation Loan, students have to carefully make arrangements and negotiate the terms of these loans with the private company.

Things to consider with Student Loan Consolidation

There are many reasons to why a person needs to avail of a student loan consolidation:

• Because it lowers the payments a student has to make every month
• Because it offers a fixed interest rate for a period of thirty years or depending on the actual amount.
• Because it provides just the one statement that students need to keep track of
• Because a student only needs to arrange with one lender

When considering a student loan consolidation, a student must first determine all of his existing loans. This will give him an idea or inventory of where his finances currently lie; or if he actually needs to consolidate his student loans through a federal loan or via the help of a private firm. Ideally, students should consider consolidating federal loans first and then consider consolidating with private firms much later.

Next, you need approach your lender and discuss the possibility drawing out the loan while still in school. You need to express your intention for early repayment. When you do this, you can invariably lower your repayment rates. But you will also be disregarding any grace periods in the future. Bear in mind that consolidated loans offer terms for longer repayment (federal loans especially) and this actually increases the total finance charges you pay up. When that happens, you can request for other arrangements from the lender (like a deferment when you graduate). Make sure you discuss all matters with your lender properly before entering into any contract.

You should only consolidate the loans one time. A student loan consolidation does not work like when you refinance a mortgage to continually lower interest rates.

You should not consider consolidating student loans if you have existing loans which already offer low or fixed rates.

Advantages of Student Loan Consolidation

Apart from the reasons stated above and apart from helping students manage their finances with little burden, a student loan consolidation might just open up other ways for the person to effectively save money.  Students can, for instance, opt to avail of the automatic debit, which can decrease rates further. When a person is able to make payments on time, lenders may consider slashing down interest rates, too.

Like any other liabilities, student loans affect one’s future credit standing, which is why it is just as important to pay these off responsibly. And with the interest rates at a monumental low point these days, having options like this has to be a life-saver. Simply put, there is no better time to consider consolidating than right now.

« « Student Loan Refinancing
Advantages Of Student Loan Consolidation » »

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Editorial Team at Exforsys is a team of IT Consulting and Training team led by Chandra Vennapoosa.

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