Student loan consolidation: making the right moves.
As June end approaches, tension lines start appearing on the
foreheads of most graduating students because the payback period
is about to begin, for all the student loans that they have
picked up for completing their education.
solution to their worries lies in consolidation. And the last
45 days of the grace period is the most opportune time to move
ahead with consolidation of student loans. Student
loan consolidations within the grace period helps the students
to lock in suitable interest rates for the entire term length
of the loan.
The procedure is simple and involves putting together all the
different loans that the student has taken during college, and
then a new consolidated loan is taken out for an amount which
is good enough to pay off all these loans. The end result is
that the student has just one Student
loan consolidations to manage which requires him to make
just one single monthly payment. Taking a look at the statistics
one realizes that more than 60 percent of the students have
taken up some kind of debt during college, and the amount of
debts taken up by students during college, averages to approximately
$18,000.00 per student.
Keeping these figures in mind we decided to dedicate this article
to students by providing information on consolidation of student
To begin with, every student must collect details about all
the student loans and other student debts that he has picked
up for his education. He has to build up a complete inventory
of all his outstanding balances along with related information
such as details about the lender, the interest rate applicable
and the monthly payments that hes making for each loan.
If you want to find out about the details of all the Federal
loans that you have taken up, log on to the national students
clearing house website, where the Federal student loan details
for each student, who has used any type of Federal aid, are
Federal Student loan
consolidations can be carried out with any bank or financial
institution which participates in the family education loan
program supported by the Federal government. Alternatively,
information on this can be had directly from the department
of education which offers both online and telephonic help.
Many students use private loans as well, but they must remember
that Private loans cannot be consolidated with Federal loans.
One important thing for you to remember is that there are no
fees applicable on consolidation
of student loans and if a lender is trying to impose any type
of fee such as application fee or credit checking fees then
you should never proceed further with such lenders. As the repayment
period approaches, you may also receive invitations from solicitors
willing to help you out with consolidation, however tempting
their offers may sound you should always avoid them or else
you will get caught in their trap.
The general rules:
of Federal Student loan
consolidations can be done at almost any time, that is
when the student to is still going through his school, during
the six month grace period with starts after graduation and
even when he has started repaying for his student loans. However,
the time that you choose for consolidation has a direct impact
on the interest rate that you will be offered on the consolidated
loan. The normal trend is that if the consolidation takes place
during the grace period or while youre still attending college
then you are eligible for lower rates and once you are in the
repayment period the interest rate may be a bit higher.
Consolidation during school will require an early repayment
status from the lender, which can be had on request. While this
is beneficial from the point of view of locking in the lower
interest rates, but in the process you will lose out on the
grace period and will have to begin repaying much earlier. However,
some lenders have the facility of deferred payments till your
graduation gets over.
Consolidation of student loans is possible only once unlike
home mortgage where you can repeatedly take refinance to shift
on to better interest rates. A second time consolidation of
student loans is possible only if the student has picked up
more educational loans after the first consolidation.
While most lenders would require you to have a minimum outstanding
balance of $7,500.00, we advise you not to proceed further with
consolidation if your outstanding balance is less than $10,000.00
as you may not derive any benefits if you proceed for a consolidation
with smaller outstanding balance.
Consolidation of student loans comes with a bundle of benefits
for the student. Firstly it gives you a chance to lock in a
lower rate of interest. Fixed rate of interest applies on consolidated
student loans and if you lock in a lower rate of interest it
will apply on the loan over the entire life of the loan.
Consolidated loans also have the facility of automatic clearinghouse,
wherein the lender is authorized to deduct monthly payments
from the students savings account. If you sign up for this
facility the lender will be glad enough to offer you are one
fourth of a percent discount on the interest rate. This also
saves you from any late payment fees, as you need not keep an
account of the last date for payment.
Being regular with your monthly payments for the initial two
or three years will increase the benefits further by either
getting you added incentives or some reduction in the interest
rate by the lender.
One more advantage is that you can repay according to your budget,
and in case you want to repay more during certain months you
need not fear about any prepayment penalties. On the other hand
there are special repayment plans under which you are allowed
to skip out on monthly payments, for months in which you cannot
afford the payments. The repayment facilities are simply versatile.
The current scenario:
There has been an approximate increase of 1.77 percent on the
consolidated student loans along with some other changes in
the student loan programs from the first of July, 2006, which
are as follows:
1. The interest rate on Stafford loans (for in school, deferment
and grace) has taken a rise from 4.7 percent to 6.5 percent.
2. Interest rates on Stafford loans for students in there repayment
period has gone up from 5.3 percent to more than seven percent.
3. The interest charged on PLUS loan is about eight percent
as against the older rate of 6.1 percent.
By now, you have all the information that is vital before proceeding
for the consolidation of your student loans.
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