Is Student Loan Consolidation Right for Me

As with everything else, even the costs of education are touching the skies. High school fees, tuition fees, cost of education stationery like books and other references are simply becoming unaffordable these days. Ambitious candidates often take loans to complete their graduation, post graduation, MBA, and other career oriented courses.

Being a student, one might have to go through various obstacles. Besides borrowing loans, one will have to manage several other expenses. It is a lot easier for them to manage their finances by consolidating their student loans. Major benefits that come along with these loans are:

  • Interest rates get reduced

  • The repayment time period extends

  • You need to pay simple monthly payments to one source

Why is it essential to consolidate loans?

Keeping track of more than one loan can be very difficult. It is not easy to handle multiple deadlines every month. More often than not, you're bound to forget your monthly payments, and the chances of errors are quite high. If you default on your repayments often, it will impact your credit scores which will cause further difficulties later down the line.

In order to get rid of all those headaches, you could choose a loan consolidation company and avail their services. You simply have to write a monthly check to a single consolidation company, and the rest of the things will be handled by experts.

Secured and unsecured consolidation loans:

Consolidating student loans will relieve you off your stress, and provide you with a peaceful life ahead. Such solutions have successfully helped students come out of debts. Consolidation companies offer you help in the form of secured as well as unsecured formats.

You could borrow great money at lower interest by choosing a secure format. In return, you need to provide security like a house, car, or other assets to the financial institute. The loan granted to you will depend upon the type of collateral that you place. You could easily borrow an amount up to $50000 for longer tenure.

You could also choose the unsecured format for borrowing loans. The financial institutes often go through your financial situation before approving such loans. The candidate with poor credit history could also avail consolidation loans, as some companies do not check the credit report of the borrowers, as long as they have a steady income source.

Best time to consolidate the loans is in during their grace periods, rather than waiting for due dates to lapse completely. One is able to consolidate loans at lower rate of interest during this period.

Different types of student consolidation loans have been mentioned below:

Private loans- If you have completed your graduation and earning good, then you could move to private student loan consolidation. Under this loan method, you could borrow loans from a private lender to pay off all your federal loans. These loans are comparatively difficult to avail.

Fixed rate loans- Many of you might be having trouble in paying off your loans due to the short time period and high rate of interest. By choosing this plan, your monthly payments would never exceed a limited amount. You simply need to fix an amount you are able to pay every month and find the loan according to your needs.

In order to perform this task, you need to find your average rate of interest on all the loans. This would help you to make a better deal.

Benefits and types of federal loans available for students

Federal student loans - They are the most affordable solutions for students. Such loans offer low rate of interest to the candidates. The government considers these loans as part of educational assistance to the candidates. Easy accessibility and student friendly rate of interest are two major benefits offered by this type of loan.

Mistakes done by the candidates

Students often try to consolidate both their private and federal loans into one. This is not a wise decision because one tends to lose several benefits that they get from federal loans. He would not be provided with interest tax deduction benefit. Hence, it is advisable to keep these loans separate.

Common student federal loans are-

  • ALAS - auxiliary loans to help students and student PLUS lent

  • SS - subsidized federal Stafford lent

  • GSL - guaranteed student loans

  • NDSL - national direct student loans

  • DUS - direct unsubsidized loans

Federal student loans are categorized into

  • Standard student loan consolidation - this type of loan is fixed for those candidates, who can afford to pay a fixed amount per month. Interest rates are generally low under such loans.

  • Extended payment plan - the repayment period of this plan extends up to 15-20 years. The time period varies depending on the student loan amount

  • Graduated payment plan - this plan is appropriate for candidates, who are completing their schooling and guarantee to pay off their loans after graduation. The repayment time period under this category extends up to 30 years. The payment amount in this case increases gradually.

  • Income contingent payment plan - this plan is designed on the basis of candidate’s income for many years. There are several other parameters to be taken care of while planning this strategy like

  • Family’s annual gross income

  • Mortgages

  • Assets

  • Other loan amount owed

Advice from the experts

If you are facing problem while repaying your debt and want to consolidate loans, it is not advisable to consult a brand new lender. You could talk to your lender and request him to manage your interest rates and plan a better loan's structure for you.

Before consolidating loans, you need to research a lot. You could definitely save thousands of dollars by making a wise decision. Before stepping ahead, you could ask several questions to yourself

  1. How long your repayment period can be extended?

  2. What private loans are you eligible for?

  3. How much interest could you pay in the future?

  4. Are you an eligible candidate for special deals on federal loans

How to choose the best consolidation company?

Think twice before choosing a consolidation company. Start looking for the one that suits your needs before you complete your graduation. You could ask help from the college financial aid office or surf the internet. Moreover, you could take help from your seniors. While looking out for the best consolidation plan, you need to be aware about certain terms related to your loans

  • Monthly payments

  • Terms of agreement

  • Interest rates

Compare the strategies and offers provided by different consolidation companies. Go through their process works and policies before taking a final decision. Know more about:

  • Penalties

  • Terms

  • Fees

  • Rate of interest


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