Consolidate Student Loan

From LoveToKnow College

College loans can add up quickly, and repayment is a serious commitment, so when it comes time to start making payments, you may want to consolidate student loans.

Consolidate Student Loan

Types of Student Loans

If you’re interested in consolidating your student loans, the first thing you need to know is what types of loans they are. Are they federal loans, either subsidized or unsubsidized, or are they private loans? If you have private loans, you must apply privately for them to be consolidated. Federal loans, on the other hand, are governed by certain laws and restrictions.

What Is Consolidation?

When you consolidate student loans, you are letting one lender gather together all your loans into one monthly payment. There is no minimum amount you need to owe to qualify for consolidation, and there are no fees to consolidate. Anyone can consolidate their student loans, regardless of credit rating.

It’s very important to note, however, that you can only consolidate your student loans once. Don’t do it if you think you may need to take out any other student loans, or you will have to pay those separately.

Why Consolidate Student Loans?

There are two main reasons for choosing to consolidate student loans: ease of repayment and lower interest rates.

Ease of Repayment

Rather than having to make multiple payments to multiple lenders, which often occurs if the borrower is in school for four or more years, consolidating your student loan means you will only have to make one payment per month.

Lower Interest Rates

If you consolidate, you can often lock in a low interest rate. Sallie Mae, one of the leaders of student loan consolidation, says borrowers can save up to 54% a month, depending on your current rate. When you choose to consolidate student loans, the interest rate you will pay is calculated by rounding up to the nearest one-eighth of one percent on the weighted interest rate of all the loans being consolidated. Sounds confusing? Go to the Federal Student Aid website and see examples. You can often get lower rates from your lender, as well, for making a certain number of on-time payments or agreeing to direct withdrawal from your back account.

How To Consolidate

In order to consolidate your student loans, you must have at least one loan in repayment, deferment, or default status. You cannot consolidate loans that are still considered “in-school". There are a number of lenders who offer students loans, and they are generally able to consolidate your loans for you. Three such lenders are:

Make sure to check your local options, as well. Some lenders, like TG, are local to states.

Options Other Than Consolidation

Deferment

You may not need to pay back your student loans as soon as you think. You can go to Adventures in Education and see if you meet the criteria to defer your payments. If so, you can download the necessary forms to apply for it. Deferment is also in effect while you are still enrolled in college.

Forbearance

If you don’t meet the qualifications to receive deferment, you may still be able to extend the time for making payments or lower your payments if you have medical or financial problems.

Alternative Payment Plans

You can also look into other less common options, such as graduated repayment (payments slowly go up in amount), income-sensitive payments (payment amounts are calculated based on your current income), and extended repayment (the payments are stretched out over a longer time period).


 


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