Student Loans Consolidation

By: EconomyWatch Content   Date: 4 December 2009

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When burdened by student loans, consolidation simplifies the repayment process by limiting the number of monthly payments and reducing the interest rate on the total debt. All types of student loans, whether federal or private, can be consolidated. The consolidation of loans is offered by private lending agencies or banks. The consolidation of federal loans is, however, backed by the federal government. 

Benefits of Student Loans Consolidation

If one has several student loans and is finding it difficult to make the multiple monthly payments, consolidation can simplify debt management and extend the repayment period. Consolidation of several loans into one single loan results in several benefits, such as:

Lower Monthly Payments: Consolidation allows one to reduce monthly payments by as much as 50% in some cases. This leads to some extra cash, enabling one to meet some other expenses.

Lower and Fixed Interest Rate: Consolidation is available at fixed interest rates and thus insulates a student from any future increases or hikes in the rates.

One Lender, One Payment: Consolidation converts multiple payments into a single payment to a single lender.

No fees or Credit Checks: Consolidation of student loans does not involve any kind of fee or prepayment penalty. In case of consolidation of federal student loans, no credit checks are required.

Improves Credit Rating: Consolidation leads to a reduction in the number of creditors, improving the credit rating of the student or parent.

Flexible Repayment Terms: Student loan consolidation allows one to extend the repayment period up to 25 to 30 years.

 

Student Loans Consolidation: The Right Choice at the Right Time

Both student and parent borrowers can opt for student loan consolidation. Students and parents cannot, however, combine their loans through consolidation. So when should one consolidate? Students can opt for consolidation only if their loans are in the grace period or after they enter repayment. Also, consolidation is only allowed if the students have finished school. Parents can, however, opt for student loans consolidation any time after the completion of the disbursement.

Student loans can be consolidated with any lender. So, a student or a parent can compare the consolidation loan programs of various agencies and choose the one offering the lowest interest rate and best repayment terms. Consolidation loans offer several repayment plans, such as extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only).


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