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Student loan consolidation service

Student Loan Consolidation: a Life saver.

The fundamentals:

When its getting difficult to handle multiple student loan consolidation service, put them all together and take a bigger loan so as to pay off all these loans and to limit your liability to a single loan, of course with a single lender. With education becoming unaffordable for most of the students, they are forced to collect loans and other forms of debts to get the ball rolling.

However, as learning gets over and repayment is about to begin, the stress to pay back and manage all these loans shows clearly on the faces of these students. The only thing that can offer respite in such trouble times is student loan consolidation service. By consolidating all the student loans not only does he enjoys single monthly payments but also the ability to adjust monthly payments to suit his financial condition. It can also mean major savings if the student has some of those expensive debts such as credit card balance, on which the interest charged, is always exorbitant.

Most of the Federal loans can easily be consolidated, but these loans cannot be consolidated with private loans. Here are some of the Federal loan types which can be consolidated:

* Federal Stafford loans

* Federal PLUS loans

* Student loans for health professionals

* Student loans with N S L guarantee

* SLS and direct loans.

The mechanism:

Consolidation offers the student an opportunity to extend the term length of the loan beyond the usual ten years repayment period, which applies for most Federal student loans, to a level which will make his monthly payments affordable. An important determinant of the term length over which the consolidated loan can be extended, is the outstanding balance of the loan. If the outstanding balance is too high you can even extend a loan over a 30 year long term, however for small amounts the maximum extension may be twelve years. Take a look at the following list to find out the maximum possible extension in the term with your balance amount:

* If the balance is below 7,500 dollars most lenders will refuse to consolidate and its advisable that you pay it off over the regular ten year term.

* If the balances in the range of$7,500.00 to $10,000.00, the term can be extended to twelve years.

* A fifteen year term is possible when the balance is in the range of $10,000 to $20,000.00

* For amounts between $20,000 and $40,000.00 the term is twenty years.

* For balance between $40,000.00 and $60,000.00 the extension is possible up to 25 years.

* For all balances above $60,000.00 the term is usually 30 years.

This list talks about the general practice amongst most lenders, however some lenders may be able to make modifications according to your requirements.

The basic idea behind extending the term is to bring down the monthly payments to a more

comfortable level which can be easily accommodated by the student within his monthly income. But do not forget that by extending the term you will eventually be paying a higher amount of total interest over the loan.

When pursuing studies most student loan consolidation service use some form of debt to manage all the costs such as tuition fees, books, lab instruments and lab fees, boarding fees and so on. There are number of expenses related to college education and ones personal funds may not just be enough to cover up the total cost of education. In times of emergencies the students may have to pick up expensive debts such as credit card, which can pose real difficulty at the time of repayment. By consolidating hes able to get rid of all these loans and the multiple monthly payments associated with all these loans.

In the process the students may also be able to convert some of the high interest rate into relatively lower interest rates which are available on consolidated loans. As a result his monthly payments may also come down, even if he does not plan to extend the term for the same purpose. That is even if he proceeds with the original term of ten years he can still manage to cut down on his monthly payments.

And in case he has some smaller loans on a short term basis which entail high minimum monthly payments, these can also be stretched out over the ten year term, again bringing down his monthly payments. However in the process he will end up paying much more amount in the form of interest.

The interest rate:

To calculate the interest rate for the consolidation loan, the lenders proceed by calculating the weighted average of all the interest rates on which he had taken all his different loans. To this average is added 1/8 of a percentage point and then it is rounded off. The figure that thus arrives is the final rate of interest which will apply on the consolidated loan. The Federal government has set up a cap of 8.25 percent on the rate of interest that can be charged on consolidation loans.

For Consolidations which take place before the end of the grace period, some amount of discount on the interest rate is given by the lenders. Usually during the calculation of the rate for the consolidated loan an additional 0.12 percent gets added at the time of rounding off, but for consolidations which take place before repayment starts only a 0.6 percent increase takes place.

A word of caution:

Student loan consolidation service may not offer you all the benefits at times because youre not able to get the most appropriate deal to suit your present financial condition. For instance if a student gets trapped in a lower cost consolidation program then he will end up paying higher monthly payments along with an increased amount of interest over the entire life of the loan.

A no-cost consolidation is not as good as it appears to be, because it contains lots of hidden costs which will only create trouble for you later on. So if youre planning on using a no cost consolidation, be careful and go through the offer details thoroughly.

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