Posts Tagged ‘Consolidating Federal Loans’

Consolidating Your Student Loans

January 4th, 2010



Debt from student loans can be crushing to recent college graduates and get in the way of achieving other life goals. Fortunately, there is a way to reduce the strain on your finances and even improve your credit score. Many graduates are turning to loan consolidating to help manage their loan repayments. The procedure and requirements differ from federal and private loans.

Consolidating Federal Loans

Stafford loans and Federal Perkins loans are examples of federal loans. These loans are given to you by the government and may or may have accrued interest while you were attending school. Consolidating your federal student loans provides a fixed-rate refinancing program that takes all of your existing federal loans and combines them into one new loan. Your monthly student loan repayment could be cut by as much as 50% as well as reduce your interest rate by .6% if you consolidate during your grace period. One monthly payment will help you simplify your finances.

Payment relief

By creating one consolidated loan you can receive payment relief, a lengthening of your repayment term from the standard 10 years to up to 30 years. This frees up your disposable income to spend on other expenses like car payments, housing, and work-related necessities. There are no penalties for overpayment, so when the funds become available you can make larger payments and minimize your repayment term.

Consolidating Private loans

Like federal loans, consolidating private loans means lumping everything into one new loan. To consolidate your private loans from undergraduate school you will have to apply with a qualified co-signer in order to be approved. If you have a graduate degree you do not have to apply with a co-signer.

Some of the benefits include reduced interest rates, rate reductions, deferment, and no prepayment penalties. Loan holders may lower your interest rates if your credit has improved. Applying with a co-signer who has good credit could help you get a lower APR loan. There is a grace period for medical/dental residents as well as military personnel if their private student loans are consolidated. As with federal student loan consolidation, you can also have your repayment period extended allowing you to pay the lowest monthly payment possible.

By: Joseph Devine

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Consolidating Private Student Loans – Things You Need to Know Before You Consolidate

December 15th, 2009



Consolidating private student loans should be done separate from consolidating federal loans. Why? Simply because consolidating federal loans results to a lower interest rate. But even then, there are other options for you to take when you want to consolidate your private student loans.

Price is not an issue with private student loans. This just tells you that when you consolidate your loans, you are simply paying off all your past loans with a new, single, and larger loan. You might ask what benefit a new and larger loan will give you. Well, the most basic one is the fact that you only have a single monthly payment to worry about.

Aside from this, you can also lower down your monthly payments with the resetting of the term period of your new loan. Nevertheless, your lender can still profit from you through the total interest you pay throughout the loan period. But you can bring this to an equal footing if you learn to negotiate your interest rates. It is a fact that interest rates are dependent on your credit standing; therefore if you have improved your credit score over time, you are certainly eligible for a lower interest rate.

About 50 points of improvement in your credit score is required for you to avail of a lower interest rate. You can consolidate your student loans with another lender for a lower rate or choose to strike a deal with your current lender to reduce the rates on your loans. Your current lender will rather have you pay interest to them than to their competitor, so be sure to ask them first.

Another way you can repay your private education loans is to get a home equity loan. You use the money you get from your home equity loan to pay off all your loans in full. However, this is only applicable if you have a house with equity. When you do this, you are locking in the interest rate instead of having to deal with a variable rate that is very common with student loans.

In consolidating private student loans, don’t forget that you are doing business with a private company. Therefore, it is their rules that you follow. Be prepared to pay the interest rate they set for you as well as the additional fees they may have for processing your loan.

Don’t forget to separate consolidating your federal loans from your private student loans. There are a lot of advantages in consolidating your federal loans and lowered interest rates are just one of them.

By: Charles Gloson

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