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 Stafford Loans & Guaranteed Student Loans (GSL) 2. DSS - Direct Subsidized Stafford Loans 3. DUS - Direct Unsubsidized Stafford Loans 4. DPLUS - Direct PLUS Loans 5. DUCON - Direct Unsubsidized Consolidation Loan, including Direct PLUS Consolidation Loans 6. US - Unsubsidized and Non-subsidized Federal Stafford Loans 7. NSL - Federal Nursing Loans 8. HEAL - Health Education Assistance Loans

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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: 
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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. 
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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.
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Student loan consolidation

In the United States, there are many college students or students ready to go to college who do not have enough money to payoff higher education. The government offers the Federal Family Education Loan Program as well as the Federal Direct Student Loan Programs to help students and families with the costs associated with college. These programs include consolidation loans that let the student consolidate certain types of loans into a single debt. The loans that can be consolidated through these programs are the Stafford Loans, PLUS Loans, and Federal Perkins Loans.

The reason that loan consolidation is important is because it reduces the monthly payments for the student and makes the term for the loan longer. The great things about loan consolidations is that the loans have a fixed interest rate for the life of the loan.. For consolidation loans, the loans usually has a longer term that most other loans. The debtor can choose anywhere from ten to thirty years. The monthly payments are lower than it would have been had the student not consolidated the loan, but the total amount that is paid over the term of the loan is higher than it would have been with another type of loan. The fixed interest is calculated with a weighted average and the features for most original student loans such as a post-graduation grace period and special circumstance forgiveness are not carried over. For these reasons, a student consolidation loan might not be suitable for every debtor. Some may have an easier time sticking with the original loan agreement.. Student loan consolidation often allows the student to keep better track of their student loans. When leaving college, students often carry loans from various different sources resulting in multiple monthly bills. A student loan consolidation can take all smaller loans and combine them into one total loan with one loan payment.
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Loan Consolidation Student Loans

Loan Consolidation Student 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 (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Loan Consolidation Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well. A separate page provides a comparison chart of consolidation loan discounts. Interest Rates the interest rate on a Loan Consolidation Student Loans is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%. For example, suppose a Loan Consolidation Student Loans has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly. If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example,

 if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 6.8%), the weighted average is $5,000 * 5.0% + $10,000 * 6.8% ------------------------------ = 6.2% $5,000 + $10,000 This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%. Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%. If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between.

 

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 Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check.

 

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 Loan Consolidation Student Loans and parent borrowers can consolidate their education loans. (Loan Consolidation Students Loans 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 July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005. Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.) Parents, however, can consolidate PLUS loans at any time. You Can Consolidate with Any Lender Students and parents can consolidate their loans with any lender, even if all of their loans are with a single lender. (The single holder rule was repealed on June 15, 2006, as part of the Emergency Supplemental Appropriations Act of 2006. Borrowers no longer need to exploit the single holder rule loopholes in order to consolidate with any lender.) Direct Loans can also be consolidated with any lender. This allows you to shop around for a lender that offers a lower rate or better discounts. Most lenders require a minimum balance before they will consolidate your loans. For example, many lenders will only offer consolidation loans for borrowers with loan balances of at least $7,500. A few lenders will offer consolidation loans for balances of $5,000 or more, and the Federal Direct Consolidation Loan program has no minimum balance for consolidation loans. (Lenders may not discriminate against borrowers who seek consolidation loans on the basis of number/type of loan consolidation student loans, type/category of educational institution, the interest rate on the loans, or the type of repayment schedule sought by the borrower.

 

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 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased. In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years.

 

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 Stafford and PLUS loans eliminating a key financial incentive to consolidate, there are still several reasons to consolidate your education loans. These include having a single monthly payment, access to alternate repayment plans, the PLUS loan interest rate loophole, and the ability to reset the 3-year clock on deferments and forbearances. But consolidation can cut short the grace period, although the grace period loophole can work around this problem. It is best to avoid consolidating Perkins loans, because you lose several valuable benefits. Beware of extending the term of your loan, as this can increase the total interest paid over the lifetime of the loan; you can stick with standard ten-year repayment. Before consolidating, always evaluate the benefits provided by the current holder of your loans. The loan discounts offered by originating lenders tend to be superior to those offered by consolidating lenders, since consolidation loans have tighter margins. Also, if you received a fee waiver or rebate from the originating lender, you may have to repay that discount.  if you consolidate with another lender. It may be possible to get some of the benefits of alternate repayment plans without consolidating, such as extended/graduated repayment with a loan term of up to 25 years and a single monthly payment, if you have more than $30,000 in federal education loan debt accumulated since October 7, 1998 with the lender. (This is due to a little known provision of the Higher Education Act, in section 428(b)(9)(A)(iv), and the regulations at 34 CFR 682.209(a)(6)(ix).) You can change the repayment schedule on your loan once per year. So consider starting off with standard ten-year repayment on your consolidation loan. You are not required to start off with extended repayment. If you find it difficult to afford the payments, you can always switch to extended repayment later.
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