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Student Loan Consolidation - How does it Work?

Student loans are a fantastic source of monetary aid for students who want support paying for their education. Unfortunately, students typically leave college with burdensome debt. In addition, they frequently have multiple loans from various lenders, meaning they are writing more than 1 loan repayment check each month. The answer to this problem is loan consolidation.
What's loan consolidation?

Loan consolidation indicates bundling all your student loans into a single loan with one lender and one repayment plan. You can feel of loan consolidation as akin to refinancing a residence mortgage. When 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 which you have only 1 student loan to pay on.

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

Loan consolidation offers many rewards:

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 choices and no fees, charges, or prepayment penalties. You can find also no credit checks or co-signers required.

You need to think about consolidating your loans if the consolidation loan would have a lower interest rate than your existing loans, particularly in case you are having trouble making you monthly payments. Nevertheless, in case you are close to paying off your existing loans, consolidation might 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 1 percent. The maximum interest rate is 8.25 percent.

To figure your interest rate, go to loanconsolidation.ed.gov for an on-line 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 regardless of whether you pick to extend your repayment program. Based on Sallie Mae, the leading provider of student loans within the United States, consolidating student loans can reduce monthly payments by up to 54 percent. Nevertheless, the only approach to reduce your payment this a lot would be to extend your repayment plan. You usually have 10 years to repay student loans, but, depending on the quantity you're consolidating, you are able to extend your repayment strategy all the way up to 30 years. Bear in mind that in the event you choose to extend your repayment term, it'll take longer to pay off your overall debt and you will pay much more in interest. You'll find no preypayment penalties, so you can often choose to pay off the loan early.
Am I eligible to consolidate my loans?

In order to consolidate your loans, you should meet the following criteria:

You might be within your six-month grace period following graduation or you've began repaying your loans
You might have eligible loans totaling over $7,500
You might have far more than one lender
You might have not already consolidated your student loans, or because consolidation you've gone back to school and acquired new student loans


The following sorts of loans may 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
Well being Education Assistance Loans
Wellness Professions Student Loans
Loans for Disadvantaged Students
Nursing Student Loans


Where can I get a consolidation loan?

You are able to consolidate your loans through 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 usually the same, regardless of where you consolidate. You could need to check 1st with the lenders that hold your present loans.

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

Should you determine to consolidate your student loans, remember that you can only do so as soon as unless you go back to school and take out much more loans. Consequently, you will wish to ensure you get the most beneficial deal the very first time. The interest rate will likely be the exact same from all lenders, but some lenders might 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 are able to consolidate your loans together, but it isn't an excellent idea for a couple factors:

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


When should I consolidate my loans?

It is possible to consolidate your loans any time in the course of your six-month grace period or soon after you have started repaying your loans. If you consolidate in the course of your grace period, you could have the ability to get a lower interest rate. However, given that you will lose the rest of the grace period, it truly is an excellent idea to wait until the fifth month of the grace period just before consolidating. The consolidation method normally takes 30-45 days.

This post is distributed by NextStudent. At NextStudent, we believe that obtaining an education is the best investment you are able to make, and we're dedicated to helping you pursue your education dreams by creating college funding as straightforward as probable. We invite you to find out a lot more about Student Loan Consolidation at NexStudent.com.