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Student loan consolidations

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.

The 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 loans.

The beginning:

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 available.

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:

Consolidation 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.

The requirements:

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.

The rewards:

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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