What Is Student Loan Consolidation
Student loan consolidation, or consolidating your student loans, means to essentially "group" all of your current student loans together into one new student loan at a possibly lower interest rate and/or monthly payment. The reason a student loan consolidation may be able to reduce a borrowers monthly student loan payment, is because it extends the lifetime (repayment period) of the loan(s). Many college graduates opt for consolidating their student loans because it can help lower their monthly student loan payment, however borrowers should be aware that by consolidating your student loans you could end up paying more (in interest charges) over the lifetime of the loan.
Should You Consolidate Student Loans
The choice to consolidate your student loans is ultimately up to you. Many college graduates look into student loan consolidation to help lower monthly student loan payments, and to possibly lock into a lower and/or fixed interest rate. Consolidating your student loans is by far one of the simplest ways to reduce the monthly costs of your student loans payments, and by consolidating your student loans (given that interest rate average after consolidation is lower then it was before) you may end up getting a better overall "deal" on your student loans.
Types Of Student Consolidation Loans
The two most common types of student consolidation loans are private consolidation loans and federal consolidation loans. Borrowers should always consolidate their federal student loans and their private student loans separately (federal student loans should consolidate into a federal consolidation loan, and private student loans into a private consolidation loan). Borrowers should never consolidate their federal student loans with their private student loans into a private consolidation loan, because they will loose all of the options and benifits assocaited with those federal student loans.
Federal Student Consolidation Loans
For federal student loan consolidation, borrowers should visit loanconsolidation.ed.gov for information on federal student loan consolidation requirements and to apply. A Direct Consolidation Loan for federal student loans is free, requires no minimum loan amount to qualify, and borrowers may be eligible for income-contingent repayment plans. Borrowers should never consolidate their federal student loans into a private consolidation loan. Always consolidate your federal student loans into a federal consolidation loan to avoid losing all of the benefits associated with your federal student loans.
Private Student Consolidation Loans
Private student consolidation loans are fairly simple to apply for, however many lenders have stopped offering private consolidation loans at this time. Some private consolidation loans may be able to reduce the costs of your monthly student loan payments, and offer no fees or pre-payment penalties. It is important for borrowers to do their research on different private consolidation loans and lenders, since private student loan products can differ from one lender to the next. Borrowers should be familiar with all terms and conditions of the private consolidation loan they are considering. Check carefully for stipulations on borrowers benefits, specifically regarding the timeliness of your monthly loan payment. Some private lenders will offer discount incentives for your monthly "on time" student loan consolidation payment, however certain lenders will void these borrowers benefits if even one loan payment is missed. There are many private student loan lenders out there, find the one that has what you are looking for.
What Are The Interest Rates On Student Consolidation Loans
Federal student consolidation loans typically offer a lower interest rate when compared to a private consolidation loan, however borrowers cannot obtain a federal student loan consolidation for their private student loans. For federal student loan interest rates and information visit: loanconsolidation.ed.gov. The interest rates for private student consolidation loans will vary with each lender, and each borrowers credit profile. Students who make the choice to consolidate their private student loans into a private student consolidation loan may be given multiple chances throughout the loan repayment period to lock into a fixed interest rate for the remainder of the consolidation loan.