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Don't Consolidate Your Student Loans Until You Read This Article

Aug 17, 2007
Education costs are quite high these days and this is the reason why so many people often end up with multiple student loans. It is not only the high tuition fee for education like medical that makes students take multiple student loans. Even students in public universities doing average programs require financial aid.

Student loan consolidation is a big help when the time for repaying all these loans comes around. There are several benefits in going for student loan consolidation including transferring all debts to a single lender, low interest rate, reworking of the repayment plan, improving credit rating, lower monthly payments, and so on.

Students can focus more on their job and careers rather than worrying about repaying different loans. Keeping tracking of so many different payments to make each month can become bothersome and missing a payment creates its own problems that are not welcome. Through student loan consolidation, it is possible to avoid all these issues.

The student loan consolidation process typically works as follows. As a student, it is possible that you take several different loans from several loan providers. Each lender will give a loan for a different amount at a different interest rate and repayment options. What student loan consolidation does is repay the outstanding amount on all these loans, then transfer the cumulative amount to a new loan. All your current debtors with their own interest rates are paid off and you basically owe the money to a single lender after consolidation. At this point, you are also offered the chance to negotiate for a low interest rate or a longer repayment plan. This way, you get rid of the problem of keeping track of several debtors, you have a lower interest rate and that lowers your monthly payments, and you can repay the consolidated loan at your own pace.

It is also possible to seek out options in federal consolidation loans where the interest rate is fixed as long as the loan exists. It will require some digging around, looking for the one option that suits you best. But considering the amount of money this can save you the effort, is fully justified. It is also important to check your eligibility for such an option.

Several websites offer you an online calculator where you can calculate the interest rate on a consolidated student loan based on the interest rate on your current loans. After this, you simply round off to the closest 1/8th of a percent of the weighted average of the interest rate on all the student loans for which you are eligible.

Most student loans come with a repayment plan spanning around 10 years starting 6 months after completion of the education program. Through federal consolidation loans it is possible to stretch those 10 years to as much as 30. Just remember that the longer you take to repay the loan, the more you are paying in interest. It is tempting to stretch the loan as much as possible but that is not always a sound financial decision as you will end up paying a lot more than you should.

It is also possible to lock in a low interest rate while you are still in school. Locking the interest rate will instantly require you to start repayment but since you are still a student you also get the benefit of deferment until your program is finished. The obvious disadvantage to this procedure is that you are no longer eligible for the 6 month grace period. Your repayment begins the day your education program is completed. You still have an option of requesting forbearance for up to 12 months on the consolidated loan. Once again, you have to judge the worth of this exercise based on your financial situation and job prospects.

Availing student loan consolidation is much easier today. This is because of the limitless information on the Internet as well as the search functions available there. With a few simple searches on the web you will soon have all the information you require to get started and can easily compare them against one another to find the one that suits you best. Most websites are updated constantly to reflect the latest changes in policies and interest rates so you are never lagging behind in terms of information. Some websites offer exclusively comparison services where you basically get to compare consolidation offers against each other. These are great once you have the basic information at hand.

There are federal as well as private lending organizations offering student loan consolidation services.
About the Author
For more information on student loan consolidation go to http://www.ConsolidationFind.com or visit http://www.articleadvocate.com/Category/Debt-Consolidation/100
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