Studnet Loan Consolidate

A consolidation loan is just what it sounds like. With a loan consolidation program your high interest student loans are combined into one sometimes lower interest loan, with one lower monthly payment, that you need to make to only one lender.

Consolidation Loans are much like the same idea of refinancing a mortgage, or taking a home equity loan to consolidate credit card debt or pay off other high interest loans. Just about every kind of Federal Student Loan qualifies for loan consolidation including; FFELP, FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. In some instances loan consolidation is even available for private education loans as well. Loan consolidation is offered for student loans for either graduate or undergraduate schools.

Interest rates on consolidated student loans are calculated by taking a weighted average of the loans being consolidated, and are then rounded up to the nearest 1/8 of a percent. The new interest rate cannot exceed 8.25%.

So for example let's say that a student has a couple of Stafford Loans that were originated on or after July of 2006. The fixed interest rates on these loans would be 6.8%. If only these loans are consolidated the new resulting interest rate would be 6.875%, a statistically insignificant increase, but the student would gain the advantages of only having to pay a single lender, and often gets extended time for pay back.

In the case of consolidating mixed loan products, like say a combination of Perkins Loans and Stafford Loans, the resulting interest rates will always wind up somewhere in between. The weighted average will give you interest rates that are lower than your highest rated loans, but that will also be higher than your lowest loan products. So again the overall increase or decrease in your interest rates will be negligible the true advantage of loan consolidation is not necessarily in lowering interest rates, but in actually lowering monthly payments, and extending the term of your loans, making your student loan debt more manageable, and less likely to result in default.

Financing an education can be extremely expensive these days and it is more common to have a student leave school in debt than not in debt. In most cases this debt runs into the tens of thousands of dollars, and when it is private student loans the interest will accrue while you are in school and get added on to the loan after you graduate. The good news is that you have six months after graduation to get a job and decide to start consolidating private student loans, or paying them back one at a time. There is a lot to consider when you are thinking about consolidating student loans, and you will find a few different ways to consolidate your loans that you may want to take advantage of.

Unlike federal student loans that have interest rate caps on consolidation loans, consolidating private student loans will put you at the mercy of the current loan rates. In some cases this can be a bad thing, and in other cases this can be the best financial thing to happen to you in your young life. Many financial institutions offer programs to help students consolidate education loans that carry high interest rates but extended payback terms. You can get a consolidation loan that would stretch as long as 20 years, and that can help lower your payments.

If you did not take out a large amount of private student loans, then consolidating private student loans may be a bit easier for you. One of your options is to pursue a secured private loan to consolidate your student loans. A secured private loan requires collateral supplied by the borrower that needs to be owned in full by the borrower, and it can be unusual for a new college graduate to have that much personal property. However, if you are able to get a secured personal loan then you can pay off your private student loans at a significant discount. If you were responsible with your finances in college then you may even qualify for an unsecured personal loan which is a loan that requires no collateral. Explore your borrowing options before resigning yourself to one solution.

Consolidating your student loans can lower your monthly payments and make paying your loans back significantly easier. If you are able to find a consolidation loan that is at a lower interest rate than your individual loan then you will be consolidating private student loans and saving money on interest payments for the overall cost of the loans at the same time.

Before you begin consolidation make sure you take a long look at the loans you are trying to consolidate. If you cannot get a better deal on a consolidation loan than you have with your individual loans then consolidation may not be your best move. If you got your private student loans at a time when interest rates were low and you graduated when interest rates were on the rise, then consolidating your loans may cost you more money than it would cost you to just keep them as they are. Keep in mind the other advantage to loan consolidation is that there are no fees or costs associated with consolidation, ever. If any service is charging any kind of upfront fees for loan consolidation, they are likely a scam and should be avoided.

Student or parent borrowers can apply for a consolidation loans, however parent loans cannot be combined with the student borrower loans, only loans to the same individual can be consolidated. But of course a parent borrower and their students can consolidate their own loans separately.

Even loans that are in default but with satisfactory repayment arrangements, may qualify for loan consolidation.

Consolidate student loans for as low as 4.5% from How to Pay Student Loans