Student loans are financial aids that are borrowed by students so that they can pay for their college and professional education. These loans are offered by government and generally have low interest rates. At times, a single loan is not enough for financing all the expenses of education including supplies, books and tuition. This forces quite a lot of students into borrowing multiple loans. Handling different loans can be expensive and very confusing. For this reason, a student loan consolidation is often a good way of handling debt and lowering overall interest payments.
What is a Consolidation?
Student loan consolidation is basically a process where all student loans can be combined to form a single loan with a single repayment plan that would be issued by one lender. A repayment option of this nature would allow you to pay a single instalment each month instead of keeping track of multiple payments. Generally, the interest rate for these loans is calculated by taking the average of all your current loans. Most types of federal loans like FISL and FFELP can be easily consolidated. Some lenders will even provide the option of consolidating private loans. Most student loan lenders and banks offer consolidation options or if you want you can approach the Department of Education for consolidating the loans.
The Advantages
The main advantage of student loan consolidation is that it will simplify all of your financial responsibilities. Another benefit is that it will allow you to decide on the repayment structure. Generally, the consolidated loans have smaller repayments each month compared to the original instalments. If you have been finding it difficult to keep up with your payments then this would be just the right option of you. You will also be able to convert the variable rate of interest to a low fixed rate, which would be a great way of saving money. The repayment term can also be extended from the normal 10 years to 30 years. The interest that you would be paying will be tax deductible and you will have flexibility in terms of the repayment options.
Are You Eligible?
There are several different criteria that you will have to be eligible for before you can consider a consolidation. For the federal consolidation, you will only be able to consolidate loans above $10,000. You will also have to be within the grace period of 6 months after graduation or you must have started the repayment of your loans. There should be no prior consolidations. If you are within your grace period or have started paying the instalments on your student loans, then you would be able to consolidate your loans.
If you have decided on loan consolidation, then you will first have to search for lenders and banks that offer this option. Look around to find the best interest rates. You will be able to find a list of lenders online along with all the necessary information. You can also consult a counsellor to determine if it would be beneficial for you to consolidate your loans. The counsellors can help you calculate the existing cost of loans and then compare it against the cost of consolidating. This would be a great way for you to determine if student loan consolidation would be a good option for you.
