Consolidating student loans can help lower monthly payments. You can consolidate both federal and private student loans. After graduating from college, you will be granted a six-month grace period before loan repayment begins. It is during this time that you should apply for student loan consolidation.
Student Loan Consolidation Definition
If you have multiple student loans, you should try to consolidate these loans into one monthly payment with one interest rate. Over time, you will save money in interest payments and be able to repay the loan at a faster pace.
Types of Student Loan Consolidation
There are two types of student loan consolidation: federal student loan consolidation and private student loan consolidation. Federal loan consolidation includes Stafford loans, Perkins loans, PLUS loans, HEAL loans and other government-issued loans. Repayment options for federal loans include fixed monthly payments, graduated payments (monthly payment increases slowly over time), income-sensitive payments and extended payments. The capped interest rate for federal loan consolidation is 8.25 percent as of August 2009. This means that your interest rate will never exceed 8.25 percent over the repayment time.
Private student loans are those issued by a bank, credit union or other public lending institution. Repayment options and interest rates vary from lender to lender.
It is not recommended that you consolidate both federal loans and private loans into one loan as you will not be able to take advantage of the repayment options and low interest rate offered under federal loan consolidation. Federal loan consolidation only applies to federal loans. If you have both types of loans, it may be best to combine federal loans and repay private loans separately.
How to Consolidate
Contact lenders that specialize in federal or private loan consolidation. Many states have higher education loan consolidation programs to help those with federal loans. Banks, credit unions and other lenders offer consolidation services for those with private loans.
Ask about repayment options. Consider your current financial situation, how much debt you owe, job prospects and how much you expect to earn in the next five to 10 years.
Choose a lender that allows you to make extra payments without penalty. Choose a repayment plan you can easily afford.
0 comments:
Post a Comment