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Student Loan Consolidation - How does it Work?

Student loans are an incredible source of monetary aid for students who need assist paying for their education. Unfortunately, students usually leave college with burdensome debt. In addition, they frequently have several loans from different lenders, meaning they're writing far more than 1 loan repayment check every month. The remedy to this problem is loan consolidation.
What is loan consolidation?

Loan consolidation means bundling all your student loans into a single loan with one lender and one repayment plan. You'll be able to feel of loan consolidation as akin to refinancing a house mortgage. Once you consolidate your student loans, the balances of your existing student loans are paid off, with the total balance rolling over into 1 consolidated loan. The end result is that you have only one student loan to pay on.

Both students and their parents can consolidate loans.
Should I consolidate my loans?

Loan consolidation provides numerous advantages:

Locks in a fixed, usually lower, interest rate for the term of your loan, potentially saving you thousands of dollars (depending on the interest rates of your original loans)
Lowers your monthly payment
Combines your student loan payments into one monthly bill

Additionally, consolidated loans have flexible repayment possibilities and no fees, charges, or prepayment penalties. You'll find also no credit checks or co-signers needed.

You ought to think about consolidating your loans if the consolidation loan would have a lower interest rate than your current loans, especially should you be having trouble making you monthly payments. Nonetheless, if you are close to paying off your existing loans, consolidation may not be worth it.
How will the interest rate for the consolidated loan be?

The interest rate for your consolidated loan is calculated by averaging the interest rate of all the loans becoming consolidated and then rounding up to the next one-eighth of one percent. The maximum interest rate is 8.25 percent.

To figure your interest rate, go to loanconsolidation.ed.gov for an on the internet calculator that will do the math for you.
Just how much can I save?

How much you save by consolidating loans depends on what interest rate you get and whether or not you pick to extend your repayment program. Based on Sallie Mae, the leading provider of student loans in the United States, consolidating student loans can reduce monthly payments by up to 54 percent. Even so, the only method to decrease your payment this significantly is to extend your repayment program. You typically have 10 years to repay student loans, but, depending on the amount you are consolidating, you'll be able to extend your repayment plan all of the way up to 30 years. Don't forget that in case you choose to extend your repayment term, it's going to take longer to pay off your overall debt and you will pay far more in interest. You'll find no preypayment penalties, so it is possible to constantly decide on to pay off the loan early.
Am I eligible to consolidate my loans?

As a way to consolidate your loans, you must meet the following criteria:

You're in your six-month grace period following graduation or you've started repaying your loans
You have eligible loans totaling over $7,500
You've far more than 1 lender
You've not already consolidated your student loans, or since consolidation you've gone back to school and acquired new student loans

The following sorts of loans could be consolidated:

Direct Subsidized and Unsubsidized Loans
Federal Subsidized and Unsubsidized Federal Stafford Loans
Direct PLUS Loans and Federal PLUS Loans
Direct Consolidation Loans and Federal Consolidation Loans
Guaranteed Student Loans
Federal Insured Student Loans
Federal Supplemental Loans for Students
Auxiliary Loans to Assist Students
Federal Perkins Loans
National Direct Student Loans
National Defense Student Loans
Wellness Education Assistance Loans
Health Professions Student Loans
Loans for Disadvantaged Students
Nursing Student Loans

Where can I get a consolidation loan?

You can consolidate your loans through any bank or credit union that participates in the Federal Family Education Loan Program, or directly from the U.S. Department of Education. The loan terms and conditions are typically the very same, regardless of where you consolidate. You could want to check first with the lenders that hold your existing loans.

If all your loans are with 1 lender, you need to consolidate with that lender.

In case you choose to consolidate your student loans, keep in mind which you can only do so once unless you go back to school and take out more loans. Consequently, you'll want to make sure you get the very best deal the very first time. The interest rate will be the very same from all lenders, but some lenders may possibly provide future rate discounts for prompt payment and a discount for having monthly payments directly debited from your account.
Can my spouse and I consolidate our loans together?

You'll be able to consolidate your loans together, however it isn't an excellent idea for a couple factors:

Both of you'll often be responsible to repay the loan, even in case you later separate or divorce
In the event you require to defer payment on the loan, both of you will have to meet the deferment criteria

When really should I consolidate my loans?

You'll be able to consolidate your loans any time during your six-month grace period or right after you've got began repaying your loans. In the event you consolidate in the course of your grace period, you could be able to get a lower interest rate. However, considering that you'll lose the rest of the grace period, it truly is a fantastic idea to wait until the fifth month of the grace period before consolidating. The consolidation method normally takes 30-45 days.

This write-up is distributed by NextStudent. At NextStudent, we think that acquiring an education is the greatest investment it is possible to make, and we're dedicated to helping you pursue your education dreams by creating college funding as easy as possible. We invite you to find out much more about Student Loan Consolidation at NexStudent.com.

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