Education Consolidation Loan

By: EconomyWatch Content   Date: 25 November 2009

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An education loan has become an imperative for students seeking to obtain a higher education degree, given the escalation expenses associated with education today. In some instances, a single student loan may be inadequate to bear the entire schooling expenses, requiring one to apply for multiple education loans. Although multiple-loans appear an appropriate, option in the short-term, it may lead to a heavy and unmanageable debt situation in the long run. Consequently, it may force a student to commit educational loan default, which is very detrimental to the credit rating. An education consolidation loan is the best alternative for avoiding such detrimental outcomes of multiple student loans.

Federal Education Consolidation Loan: Benefits

Some important motivations for applying for an education consolidation loan are: 

  • Lock-in interest rate: Consolidating multiple federal student loans helps to setup a single fixed interest rate, which is guaranteed for the entire life of the loan. Therefore, students need not worry about market volatility and interest rate fluctuations. Interest rate on a consolidation loan is established by calculating the weighted interest rates of all loans integrated in the consolidation.

  • Simplify finances: Once federal education loans are consolidated, the borrower needs to make only a single payment to a sole lender every month. This helps to simplify payments, and avoid late-payments and defaults more effectively.

  • Lower monthly payments: Education consolidation loan enables one to spread the payments over a longer duration, which may be as high as 30 years. Consequently, one can significantly lower the monthly payments. 

Federal Education Consolidation Loan: Terms

All federal education loans qualify for consolidation, and there is no minimum balance required for qualification. Moreover, loan consolidation application is free and does not require any credit checks. Other special provisions of education consolidation loan are:

  • One need not be employed or offer any property as collateral to become eligible for the loan.

  • A co-signer is not required during consolidation application.

  • Student loan consolidation takes approximately 30 to 60 days to become effective.

In addition, federal education consolidation loans provide students the same benefits as individual federal loans. This includes claiming interest under tax exemption, applying for loan forgiveness and choosing to forbear or defer payment.


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