How good is student loan consolidation
The harsh fact, in front of us today, is that the cost of education
is much higher to what most people can afford. In order to complete
a college degree you need several thousands of dollars which
may be unaffordable for many.
financial sources not being enough most families have to look
outside for financial help to support to their childrens education.
However, the Federal government has been quite considerate and
has made available several financial aid programs to support
students. These loans, which can be taken up both by the students
and by their parents, offer immense convenience to student loan
consolidation loans in the perusal of their educational and
With these provisions, everything goes fine till the final day
of graduation and even for the first half of the next six months
which are known as grace period. But things take a different
turn when the grace period is about to end and the student has
to start repaying for all his student loans acquired during
his college period. This can build up a lot of tension and also
keep the student distracted at his new job.
Thankfully, there is a way to come out of this problem and it
is commonly referred to as consolidation. Consolidation is a
helpful tool with ample benefits tagged along. In the course
of this article we will first elaborate upon the process of
consolidation and then detail out a bunch of important benefits
that consolidation brings along with it.
Student loan consolidation:
With the high cost of education, a single student loan consolidation loans may
not be adequate to take care of all the costs, making the student
pickup several loans from different lenders. And all these loans
will come on a different rate of interest and will have different
payback plans attached. This can make it very difficult for
the student to handle all of these without making any mistakes.
And if he does make a mistake it will cost him heavily.
Consolidation will involve taking a new bigger loan to pay off
all these different loans, and in the process you will get several
added benefits. With all his student loans consolidated his
responsibilities come down and he needs to concentrate on just
one single consolidated loan, which definitely means he has
to make just one single monthly payment and that too to a single
lender only. Imagine how convenient it can be to make just one
payment every month instead of having to write several checks
and then ensure that all those checks get deposited before the
due dates. Definitely, consolidation offers a lot of convenience
to the student in paying back for those numerous loans that
he had used to complete his college degree.
If youre planning on consolidating your student loan consolidation loans ensure
that your outstanding balance is more than $10,000.00 or else
you may not be able to realize the completed benefits of consolidation.
However, the minimum amount of loan balance that most lenders
look for, before consolidation, is $7,500.00.
Some amendments have been made, with regards to student loans,
by the Federal
government and now it is possible even for students who are
still pursuing their college degree to consolidate their educational
Before we go on to enlist the benefits, we must mention that
student loan consolidation loans may
not always be the best solution to handling your student loans,
especially so if your student loan has certain special benefits
which will disappear once the loan is consolidated with other
loans. Also remember that Federal student loans cannot be consolidated
with private student loans.
1. Reduction in monthly payments: depending
on the type of student loan, the type of consolidation program
and the choice of lender, the monthly payments can be substantially
decreased to suit the students convenience. Stretching the
repayment over a longer term can even make your monthly payments
smaller by 50 percent.
2. Easy to handle: with only one monthly payment
to make after consolidation of the student loans, life becomes
much easier for him. It not only cuts down the burden of writing
a number of checks but also makes it easier for the student
to organize his payments and his personal finances.
3. Fixed interest rate: the Federal student
loans are on a variable rate of interest, but by getting your
loans consolidated you can move on to a fixed rate of interest
will which will apply on the loan over its complete life. However,
that also means that you need to find an offer which gives you
the lowest possible interest rate. The calculations of the rate
of interest, which will apply on your consolidated loan, are
carried out using all the different interest rates that you
were paying on your different loans.
4. Extending the term: when the total outstanding
balance of all your loans is too high you can look forward to
getting your loans consolidated over a longer term to keep the
monthly payments within bounds. The maximum term for which the
consolidated student loan can be extended is 30 years and in
most cases extending over a 30 year term would mean a 60 percent
decrease in the monthly payment. However, what you must remember
is that stretching out the term of the loan connotes a bigger
amount of total interest to be paid over the loan.
5. In school consolidation: consolidating student
loans while the student is still in school enables him to lock
in the lower rate of interest. To do this the student will have
to request his lender to put his loan into the repayment status,
although he is not required to start making payments as they
automatically get deferred till the time he completes his school.
A major problem associated with this is that the student looses
his grace period. A possible solution to that would be requesting
6. Better interest rates: in some cases a student
may have used expensive sources of finance such as credit cards
which have a higher interest rates structure, and with consolidation
these too get converted to a lower rate of interest which can
bring in a lot of savings.
Before we close, the only advice is that do a lot of research,
compare and evaluate all options before you get your student
loans consolidated so was to ensure maximum benefits.
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