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Student Loan Consolidation - How does it Function?

Student loans are a fantastic source of financial aid for students who want aid paying for their education. Sadly, students typically leave college with burdensome debt. Furthermore, they often have several loans from different lenders, meaning they are writing more than 1 loan repayment check every month. The solution to this problem is loan consolidation.
What exactly is loan consolidation?

Loan consolidation means bundling all your student loans into a single loan with 1 lender and one repayment plan. It is possible to believe 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 one 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 delivers a lot of positive aspects:

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 1 monthly bill


In addition, consolidated loans have flexible repayment alternatives and no fees, charges, or prepayment penalties. You can find also no credit checks or co-signers required.

You must take into account consolidating your loans if the consolidation loan would have a lower interest rate than your current loans, especially if you are having trouble generating you monthly payments. Nevertheless, if you're 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 being 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, pay a visit to loanconsolidation.ed.gov for an on the internet calculator that can do the math for you.
Just how much can I save?

Just how much you save by consolidating loans depends on what interest rate you get and no matter whether you decide on to extend your repayment strategy. Based on Sallie Mae, the leading provider of student loans in the United States, consolidating student loans can minimize monthly payments by up to 54 percent. Nonetheless, the only strategy to lessen your payment this much would be to extend your repayment program. You typically have 10 years to repay student loans, but, depending on the amount you're consolidating, you can extend your repayment strategy all the way up to 30 years. Don't forget that in case you choose to extend your repayment term, it is going to take longer to pay off your overall debt and you will pay far more in interest. There are no preypayment penalties, so you can often 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 might be in your six-month grace period following graduation or you've started repaying your loans
You've eligible loans totaling over $7,500
You might have much more than one lender
You might have not already consolidated your student loans, or because consolidation you've got gone back to school and acquired new student loans


The following types 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
Health Education Assistance Loans
Well being Professions Student Loans
Loans for Disadvantaged Students
Nursing Student Loans


Where can I get a consolidation loan?

You'll be able to consolidate your loans by way of any bank or credit union that participates within the Federal Family Education Loan Program, or directly from the U.S. Department of Education. The loan terms and conditions are normally the same, regardless of where you consolidate. You may need to check 1st with the lenders that hold your current loans.

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

In case you choose to consolidate your student loans, don't forget which you can only do so when unless you go back to school and take out a lot more loans. For that reason, you may wish to make certain you get the most effective deal the first time. The interest rate will likely be the exact same from all lenders, but some lenders may well offer future rate discounts for prompt payment along with 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, but it just isn't a good thought for a couple factors:

Both of you may always be responsible to repay the loan, even in the event you later separate or divorce
If you will need to defer payment on the loan, both of you are going to have to meet the deferment criteria


When ought to I consolidate my loans?

You are able to consolidate your loans any time throughout your six-month grace period or following you have began repaying your loans. Should you consolidate in the course of your grace period, you may have the ability to get a lower interest rate. Nevertheless, given that you are going to lose the rest of the grace period, it really is a fantastic notion to wait until the fifth month of the grace period just before consolidating. The consolidation procedure generally takes 30-45 days.

This article is distributed by NextStudent. At NextStudent, we believe that getting an education will be the finest investment you can make, and we're dedicated to helping you pursue your education dreams by making college funding as straightforward as possible. We invite you to understand a lot more about Student Loan Consolidation at NexStudent.com.