Education Loan Consolidation

By: EconomyWatch Content   Date: 25 November 2009

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Education loan consolidation is a vital resource to simply one’s finances, since remembering to make multiple payments to several lenders may become very cumbersome. Student loan consolidation can be undertaken on federal as well as private education loans. However, it is advisable to consolidate them separately. This is because federal loans come with several lucrative benefits, which would one would have to give up when they are consolidated with private education loans. 

Private Education Loan Consolidation: Facts

Private educational loan consolidation is more difficult to obtain than federal education consolidation loans. Moreover, consolidation of private loans requires payment of additional fee, whereas federal student loans do not entail fees. Although the terms for private education loan consolidation vary from lender to lender, some common terms and provisions are:

  • The loan is largely dependent on a student’s credit history. A good credit report improves the chances of obtaining a consolidated loan.

  • Most financial institutions establish a minimum loan amount for a student to qualify for private education loan consolidation.

  • To participate in a private education loan consolidation program, a student must have completed or discontinued the course for which s/he borrowed the loan. 

Education Loan Consolidation: Considerations

A student borrower must keep the following considerations in mind before applying for education loan consolidation:

  • Consolidation can be only carried out once, and subsequent inclusion of an additional student loan(s) is barred. Hence, education loan consolidation must be carried out at an opportune time to include maximum loans.

  • Student loan consolidation can never be “unconsolidated” or reversed.

  • If consolidation is applied for during the grace period, before the monthly payments become due, one can obtain a lower interest rate. This is because during the grace period, interest rates are based on the rates charged during schooling, which is typically lower for reducing the burden of repayment.

  • Consolidating multiple student loans requires one to forfeit all benefits associated with individual loans. Hence, it is vital to weigh the costs of loan consolidation with the individual benefits and determine which alternative would be more profitable.

Students who have both federal and private education loans must first consolidate the former. Doing so helps to reduce the number of open accounts on the credit report, helping to boost the credit score. This, in turn, helps one acquire a better interest rate on private education loan consolidation.


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