Student Loan Consolidation – How Does It Work?
Student Loan Consolidation – How Does It Work?
Student loans are an important source of financial aid for students who need help financing their education. Unfortunately, Students often leave university in debt. Plus, they often have multiple loans from different lenders, which means they write more than one repayment check each month.
What is credit consolidation?
Loan consolidation means combining all of your student loans into one loan, offered by one lender and one repayment plan. You can think of loan consolidation as similar to mortgage refinancing. When you consolidate your student loans, your existing student loan balances are paid off and the total balance is combined into one consolidated loan. The main thing is that you only have to pay one student loan.
Students and their parents can consolidate their loans.
Should I combine my credits?
Consolidation of credits has several advantages:
– Sets a generally lower interest rate for the life of your loan, which can save you thousands of dollars (depending on the original interest rate of your loan)
it reduces your monthly payment
Consolidate student loan payments on one monthly bill
Plus, there are flexible repayment options for consolidated loans and no fees, charges, or penalties for early repayment.
If the interest rate on the consolidation loan is lower than the interest rate on your existing loan, you should consider consolidating your loans, especially if you are having difficulty making monthly payments. However, if you are about to pay off an existing loan, consolidation may not be worth it.
What is the interest rate for a consolidation loan?
Your composite loan rate is calculated by averaging the rates of all composite loans and rounding to the nearest eighth percent. The highest interest rate is 8.25%.
To find out your interest rate, visit Loanconsolidation.ed.gov for an online calculator that can do it for you.
How much money can I save?
The amount you save with a consolidation loan depends on the interest rate you get and whether you choose to extend your repayment plan. According to Sallie Mae, one of the leading student loan providers in the United States, consolidating student loans can reduce monthly payments by up to 54%.
However, the only way to reduce payments by this amount is to extend the payment plan. You usually have 10 years to repay your student loans, but depending on the consolidated amount, you can extend the repayment period up to 30 years. Keep in mind that if you choose to extend the repayment period, it will take longer to fully pay off the debt and you will have to pay more interest. There are no prepayment penalties, so you can choose to prepay your loan at any time.
Am I eligible for credit consolidation?
You are within the six-month grace period after closing or have started repaying the loan
Your total eligible loans exceed $7,500
– you have more than one creditor
– You did not consolidate your student loans or returned to school and applied for new student loans after consolidation
Subsidized and unsubsidized direct loans
Federal Subsidized and Unsubsidized Stafford Loans
– Direct Loans PLUS and Federal Loans PLUS
Direct Consolidation Loans and Federal Consolidation Loans
Guaranteed student loans
federal student loans
Additional Federal Student Loans
Granting loans to support students
Perkins Federal Loan
Direct State Student Loans
National Defense Student Loans
Loans for health education
Health Care Student Loans
needy student loans
nursing student loan
Where can I get a consolidation loan?
You can consolidate your loans through any bank or credit union participating in the federal Family Education Loan Program or directly with the US Department of Education. Loan terms are generally the same regardless of consolidation location. You may want to check with the lender who holds your existing loan first.
If all of your loans are from one lender, you will need to consolidate them with that lender.
If you decide to consolidate your student loans, remember that you can only do this once, unless you go back to school and take out other loans. That’s why you need to make sure you get the best deal the first time. All lenders have the same interest rate, but some lenders may offer future interest refunds for immediate payments and discounts for monthly payments that are debited directly from your account.
Can my husband and I co-lend?
You can consolidate loans, but it’s not a good idea for the following reasons:
You are both responsible for repaying the loan, even if you break up or separate later.
– If you need to defer loan repayments, both of you must be eligible for the deferral
When should I consolidate my loans?
You can consolidate your loans during the six-month grace period or any time after loan repayments begin. You can get a lower interest rate if you consolidate during the grace period. However, since you will lose the rest of the grace period, it is best to wait until the fifth month of the grace period to merge
This project is distributed by NextStudent. At NextStudent, we believe that education is the best investment you can make and we are committed to helping you achieve your educational dreams by making it as easy as possible to finance your education. We invite you to learn more about student loan consolidation at http://www.NextStudent.com.