If you have taken student loans from different lenders to fund your education and now after finishing college, you’re having a hard time to repay your debts, you can take advantage of student loan consolidation program.
How does student loan consolidation work?
When you opt for a student loan consolidation program, the outstanding balance of all your existing loans will get replaced by a new consolidated loan. Instead of paying multiple lenders, you will have to pay one lender only. On your behalf, your parents can also go for consolidation.
The interest rate for your consolidated loan will be calculated by averaging the interest rate of all your existing loans, which are to be consolidated and then rounding up to the next one-eighth of one percent. The maximum interest rate is 8.25 percent.
You can get your loans consolidated from any bank or credit union. You can also get it directly from the U.S. Department of Education. You should first check with the lender, from whom you have taken your current loan. The consolidation process usually takes 30-45 days.
What are the eligibility criteria?
In order to consolidate your loans, you must meet the following criteria:
You will have eligible loans which exceed $7,500
You have more than one lender
You have not consolidated your student loan yet, or after consolidation have again got back to school and obtained new loans
You are in your six-month grace period after graduation
You have started repaying your loans
What types of loan can be consolidated?
The types of loans that can be consolidated are:
Guaranteed Student Loans
Direct PLUS Loans and Federal PLUS Loans
Direct Subsidized and Unsubsidized Loans
Federal Subsidized and Unsubsidized Federal Stafford Loans
Direct Consolidation Loans and Federal Consolidation Loans
Federal Perkins Loans
Nursing Student Loans
Federal Insured Student Loans
Health Education Assistance Loans
Health Professions Student Loans
Loans for Disadvantaged Students
Federal Supplemental Loans for Students
National Defense Student Loans
Auxiliary Loans to Assist Students
National Direct Student Loans
What are the benefits of loan consolidation?
The benefits of loan consolidation program are as follows:
You will have to make a lower monthly payment
All your multiple student loans will be combined into a single bill
You will get a lower interest rate that will help you save money
You will have flexible repayment options
You will not have to pay extra fees or prepayment penalties
You will not require credit checks or co-signers
Prior to going for a student loan consolidation program, you should make sure that the interest rate on your new loan is lower than your existing loans. You should shop around and compare the rates offered by different lenders and choose the lender, whose terms and conditions suit you the best.