2011

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How to Consolidate Student Loans

 

Student loans are some of the most daunting challenges a new graduate is faced with. It can be difficult to concentrate on seeking employment as financial responsibilities loom in the background. Loan consolidation can ease this burden and after careful decision-making, you will find you are well on your way to wiping out your debts.

 

A Primer

 

 

Loan consolidation is the process of combining all unresolved loans that you owe into a single loan. This new loan will have a new monthly rate charged to it and you’ll only have to pay one loan each month. The new rate is fixed so that it doesn’t increase no matter what market conditions are.

 

Many federal student loans can be consolidated and some of these are:

 

• Federal Consolidation Loans

• PLUS or Parent Loan for Undergraduate Students

• DirectPLUS

• Stafford Loans

• Federal Direct Consolidation Loans

• GradPLUS Loans

• Direct GradPLUS Loans

• Perkins Loans

 

Processes

 

Loan repayment can be a complicated process and usually entails long periods of time. You need to devise a well-thought out scheme that works just as well in the long run as it does in the short term. Here are a few guidelines on how to go about consolidating:

 

1)  Determine if you are indeed eligible to apply for consolidation. While there might be differences on criteria depending on the individual regulations of lending agencies, here are a few requirements that are similar across all lenders:

 

• You are a U.S citizen and you either have dropped out of your degree program or have graduated.

• The type of loan you took is on the list of qualifying federal loans.

• Your loans amount to $7,500 or higher.

• Your have not failed to make payments on your loans.

 

2)  Evaluate if consolidation is the right path to take. There are advantages and disadvantages to loan consolidation that you need to consider.  

 

Advantages

• Monthly payments are lower.

• Rates are fixed so they don’t increase over time.

• You eliminate the headaches associated with dealing with multiple lenders and varying interest rates.

• There are no credit checks and prepayment penalties or other fees imposed.

• Lenders offer numerous benefits such as rebates.

 

Disadvantages

• Since your payment period is extended, the total payments you have to make are actually higher.

• Because rates are fixed, your interest rate won’t go down even if market conditions are favourable.

• The benefits you got from your previous loans may no longer be available under the consolidated loan.

 

3) If you are still keen on consolidating, it is now time to review repayment options. Lenders offer varied schemes, the most popular of which is the extended plan which extends repayment up to 30 years.

 

4) Once you’ve refined your preferences, make sure you pick a reliable lending firm. Compare lending firms and the benefits they offer. Make sure to read documents carefully and always ask for clarification on unclear areas.

 

 

 

 

 

 

>> Back to Debt Consolidation Loans 2011

 

Related Pages on Debt Consolidation Loans

Consolidate Debt Loans - the Pros and Cons

Insight to Debt Consolidation Loan Programs

Low Interest Debt Consolidation Loans

Using a Second Mortgage Loan to Consolidate Debt

 

Important Note

Each year, on July 1st, federal loan rates and schemes are subject to changes. Make sure you have consolidated your loans by then.