Student Loan Consolidation Primer
By admin at 6 August, 2007, 8:08 am
Student loan is just as much a long-standing academic practice as it is a commercial one. In the United States, student loan industry buzzes with action as more and more students throng colleges and universities to pursue higher education and other professional as well as technical courses. No wonder student loans have become a kind of a necessity.
However, managing these loans, doling out the various loan payments at varied interest rates, and maintaining a record of all the loan related activities can prove to be really pesky for the students. After all, students are here to study!
That’s where student loan consolidation comes in handy. Student loan consolidation binds together all your different loans to turn them into a single loan. Thus, you don’t have to worry about five different loans and make five different monthly payments at five different interest rates.
Specially devised to help students, a student loan consolidation program entails paying one affordable monthly payment. However, since the monthly payment is low, you have to pay for a longer period of time. Student loan consolidation interest rates are usually genuine calculated by rounding up an average of all the loans that you are consolidating. Interest rate does not exceed 8.25%.
The average interest rate is also rounded up to the nearest 1/8th of a percentage. This does not mean that the consolidator will be paying a lower amount of interest rate on the loans. But, it ensures that there will be a relatively unchanged interest rate throughout the loan’s lifetime. However, in terms of the interest rates, sometimes not consolidating can be more beneficial.
You can avail yourself of loan consolidation either by opting for a federal student loan consolidation or though a private company. Under a federal student loan consolidation program, you are offered a new loan, so that you may be able to clear either all of or some portions of your pre-existing federal student loans.
Usually, this loan is payable within a period of thirty years, on a fixed rate of interest. Federal student loan consolidation provides students with several advantages (such as tax deductible interest and possibility of deferring payments if the student decides to pursue further education) that are not offered by a loan consolidation by a private company. A private loan works like any another loan from a private bank or other financial institute.
It is advisable that if you have federal loans as well as private loans, you should consolidate them independently. If you consolidate a federal loan with a non-federal loan, you will not be able to get the benefits offered by federal loan consolidation.
You must do proper research before opting for a student loan consolidation option. This will help you put things into perspective, weigh the pros and cons, and finally take the right decision. FinAid.org is a good online resource that can help you get the student loan consolidation details you are looking for. It even lets you compare the costs and rate of interest of the different consolidated loans available in the
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