The Basics Of Student Loan Consolidation
by Gregg Pennington
Whether you are a parent of a college student, a current
student, or a recent college graduate, you have undoubtedly
realized how confusing student loans can be. Many students
have multiple loans from several lenders, each with its own
distinct terms, rate, and payoff amount. Keeping track of
these multiple loans seems like a full time job where,
instead of receiving a paycheck, you are given stacks of
payment coupons. There is a way to free yourself from the
overwhelming monotony of being in this position: Student
loan consolidation.
Student loan consolidation makes things much less
complicated; instead of tracking multiple loans and
payments, you will only have one monthly payment. A
typical repayment period is ten years. While in essence
student consolidation loans are large loans used to pay off
several smaller loans, they are governed by different rules
than other types of consolidation loans. Here are some
distinct features of student loan consolidation:
1. You cannot consolidate student loans that are in
default. If you have already defaulted on one or more
student loans, you must first work with the lender/s to get
back on a payment plan; then you are free to consolidate
these loans. You may consolidate student loans that are
still in the grace period, as well as loans on which you
are currently making payments.
2. If your student loans are through conventional federal
funding sources like Stafford Loans, Direct Loans, Perkins
or Guaranteed Student Loans, and you are not in default on
any student loans, you should find it relatively easy to
obtain a consolidation loan; however, it is not always
possible to consolidate student loans from private funding
sources. You should consolidate any federal student loans
first, because their availability and interest rates are
not based on a person's credit. By making timely payments
on a federal loan consolidation, you can improve your
credit and get better rates and terms when you consolidate
any private student loans.
3. When you consolidate student loans, the interest rate
you will pay is calculated based on the average rate of
your existing loans. If most of your outstanding student
loans have similar interest rates, then your student
consolidation loan should have approximately the same rate.
If your interest rates vary widely, your consolidation
loan will be based on a weighted average of your existing
rates.
4. You should be able to consolidate your student loans
without having to pay a fee. Beware of lenders that offer
to consolidate your loans for a small fee; There should be
no fees for student loan consolidation, and you can easily
shop elsewhere.
5. Many lenders require that you consolidate a certain
minimum amount of student loan debt. The amount will vary
from lender to lender, but if your student loans total less
than $10,000, you may have fewer options available when
consolidating.
By simply consolidating your outstanding student loans, you
will see improvement in your overall credit score. Part of
your credit score is based on the number of accounts you
have open, and by reducing this number you will be seen as
a lower credit risk. For recent college graduates whose
maximum earning potential may be years in the future,
student loan consolidation can make surviving on an entry
level salary much more comfortable.
Gregg Pennington writes articles on a number of topics
including student loan debt and student loan consolidation.
For more student loan information visit
http://www.onlinemoneysources.net/student-loan-consolidation
.html