Student Loan Consolidation Program Services Refinance Information Center
Student Loan Consolidation. Get the Facts
...before the Rates Go Up.
Many students and parents are wondering if it is beneficial to consolidate educational loans to take advantage of these new low rates. The answer is…it depends.
By law, lenders cannot charge fees or run credit checks to process student consolidation loans. Borrowers have a choice of several repayment schedules: standard payments are fixed monthly payments which extend over a set period of time; graduated payments start out low and increase every two years; income-sensitive payments are variable payment amounts based on annual income; and extended payments are available for large loans. Borrowers may change repayment plans at any time. Consolidation, however, is a one-time process. It cannot be done again unless there is a new loan to be included.
The Federal Consolidation Loan Program was established by Congress to help students manage federal student loan debt. Federal Consolidation Loans give borrowers (both students and parents) the opportunity to simplify repayment by combining federal loans into one convenient monthly payment. To qualify, borrowers must have at least two federal student loans. While most traditional student loans are paid in full over the course of a ten-year period, repayment terms on consolidation loans can extend from ten to thirty years, depending on the amount of the loan. The interest rate on a consolidation loan is a fixed rate for the entire term of the loan equal to the weighted average interest rates of the outstanding loans, rounded up to the nearest 1/8th percent, or 8.25 percent, whichever is less. Some lenders offer additional financial incentives for automatic debit payments and on-time payments.
Furthermore, if loan consolidation is done during the loan "grace" period -- typically the six months after graduation when borrowers are not required to begin repayment -- the interest rate will be based on a weighted average of lower in-school interest rates. Since the first payment on a consolidation loan is due within 60 days of disbursement, borrowers who are in a grace period and want to maximize their deferment benefits should submit applications for loan consolidation as close to the end of their grace period as possible. Once the consolidation loan is disbursed, borrowers may forfeit any time remaining in their grace period. Some lenders will allow the borrower to retain the grace period and also get the lower interest rate. Be sure you understand your lender's policies.
Obviously, the major benefits of loan consolidation are one lender, lower monthly payments, and a fixed interest rate. Students and parents should be aware that loan consolidation generally extends the repayment period and, in the long run, may result in increased finance charges over the lifetime of the loan. There are, however, no prepayment penalties on Federal Consolidation Loans, so interest costs can be reduced by paying off the loan early. Students should also take into account that Federal Consolidation Loans have fewer deferment, cancellation, and forgiveness options than some original student loans. Students considering full-time graduate or professional school should investigate deferment options before entering into loan consolidation. While payments may be deferred during periods of school enrollment, interest will accumulate on the consolidation loan. Borrowers with Perkins Loans should carefully weigh the advantages and disadvantages of including these loans in a consolidation package, since Perkins Loans offer special benefits such as 100 percent cancellation for employment in certain fields and an interest subsidy. Borrowers forfeit these benefits once they enter into a consolidation loan. Also, because the interest rate on Perkins Loans is 5 percent, the inclusion of Perkins Loans in the consolidation loan may have a negative impact on the calculated average used to determine the interest rate on the consolidation loan.
Parents who obtained Federal Parent Loans for Undergraduate Students (PLUS) to help their children through their undergraduate years are also eligible to apply for Federal Consolidation Loans. Although rates are higher than those offered to student borrowers, parents can still obtain attractive fixed rates, depending on when the variable loan was disbursed. PLUS borrowers must pass a credit check as part of the consolidation process. Parent PLUS Loans cannot be consolidated with the dependent student's loans.
Until July 1, 2006, married couples can consolidate their educational loans into one fixed payment. They should be aware of the disadvantages associated with spousal consolidation. In cases of divorce, the consolidation loan cannot be unconsolidated. Each spouse is mutually responsible for repayment of the loan. Default on the part of one person will adversely affect the credit rating of the other party. Also, in order to qualify for deferment, both partners must simultaneously qualify for the same type of deferment. Therefore, each spouse may wish to consolidate separately to minimize risk.
The following is a list of loans that are eligible for consolidation through the Federal Consolidation Loan Program:
· Federal Stafford Loans, subsidized and unsubsidized, including Guaranteed Student Loans
· Federal Supplemental Loans for Students (SLS)
· Federal Perkins Loans (NDSL)
· Federal Direct Loans
· Health Professions Student Loans, including Loans for Disadvantaged Students (HPSL)
· Health Education Assistance Loans (HEAL)
· Federal Insured Student Loans (FISL)
· Federal PLUS (Parent) Loans
· Federal Nursing Student Loans (NSL)
In conclusion, loan consolidation can be a wise choice for borrowers who are struggling to meet their current loan payments. The lower monthly payments can give individuals flexibility to better manage current monthly expenses and loan debt. Borrowers should beware of the temptation to let loan payments drop so low that they are only paying interest and never tackling the principal. They should also consider the ramifications of extending educational debt over long periods of time. With twenty to thirty year repayment plans, individuals may still be repaying their own educational loans while trying to put their children through college. As salaries increase, most borrowers are advised to accelerate their educational loan payments.
Now is the time to consolidate your loans. Rates are going up by 1.93% on July 1st, 2006.
With a federal student loan consolidation program, you can reduce your student loan payments up to 54%! Many students often don't even know this student loan consolidation option is available to them. But now is the time to take advantage of the lowest student loan interest rates in history. The average customer saves $150 per month! Don't wait until the rates go up, fill out the form now to consolidate your student loans through the federal government.
Remember, by using the Federal Student Consolidation Loan, you will guarantee that your interest rates will never increase again. Interest rates are as low as 1.625%. There is no credit check, and typically it is only a 10 minute online process.
With the high cost of getting an education these days, many students find themselves in high levels of debt by the time graduation comes around. Student loans can weigh you down for a long time even after you have completed your education, and when you are just starting out in life after college, these loans can prove a real financial burden. If you have federal student loans such as the Stafford or PLUS loan, you could benefit from federal student loan consolidation. This consolidation package is for students with federal loans, and can reduce loan repayments by over fifty percent in many cases. This can make a huge difference to your financial freedom, enabling you to start enjoying life to the full.
Whether you are making repayments on your federal loans or whether you are on a grace period with these loans, you could be eligible for this form of student loan consolidation. If you are a parent that has taken on federal loans for your student child, you could also be eligible for the federal student loan consolidation program. It is best to apply for your federal student loan consolidation while you are in a grace or deferment period, as you are more likely to enjoy a lower interest rate. Once normal repayments of your federal student loans have resumed, you will probably find that the rate of interest charged on the consolidation loan is higher.
The federal student loan consolidation program enables you to enjoy a fixed rate, which could save you a fortune if the interest rates are low when you make your application. By consolidating your student loans, you will find that your monthly repayments are slashed, leaving you with far more cash in your pocket and far more financial freedom.
Applying for federal student loan consolidation is easy, and can usually be done online. You will need to provide a certain amount of pertinent information when making your application for federal student loan consolidation. You should provide the balances and the current interest rates on all federal student loans that you wish to consolidate, as well as the details of the company or companies that deal with your current student loans. You must also provide the details of two personal references, and these must be based within the United States.
When you make your application for federal student debt consolidation, only eligible federal student debts will be considered for consolidation through the program. However, it is still worth listing any other financial commitment you have, such as credit card balances and private loans. Your overall levels of debt may be taken into consideration when the interest rate is being calculated in your consolidation loan, so it is worth listing debts even if they are not actually eligible for consolidation through the program.
If you are a student with private loans and credit card debt, it is still worth looking into student loan consolidation solutions. Although private loans and credit won’t be eligible for consolidation through the federal student loan consolidation program, there are consolidation packages available that could help to cut your repayment and leave you with more cash in your pocket. The number of lenders in operation throughout the United States is at a record high, and many more lenders now offer packages that cater to students. You can compare the various consolidation solutions by browsing loan packages online, and you should ensure that you compare the features and benefits of these loans as well as the interest rates.
Student loan consolidation can be a great help to students that have already accumulated financial burdens. These loans can help to keep monthly outgoings to a minimum, enabling students to start enjoying life and to concentrate on getting a well-paid job, a place to live, etc. The Internet provides an effective tool for students and graduates to look into both personal and federal debt consolidation loans, enabling easy application facilities and plenty of information to ensure that students find the solution that will best meet their needs.