When Should You Consolidate Student Loans?
By Mark Kessler, Sat Dec 10th
If you have just graduated from college, the likelihood is thatyou are under a large amount of debt in the form of studentloans. You might be wondering if there is any way to reduce theamount you have to pay. One solution for reducing your debt isto consolidate your student loans.
Student loan consolidation is similar to refinancing a house onbetter terms: although the principal of the loan will not beaffected, the interest rates you can lock in when youconsolidate student to a fixed rate can be substantiallybetter, reducing your monthly payments by up to forty percent.Plus, you might be able to stretch out your payment time toreduce your monthly payment amount even further.
The disadvantage when you consolidate student loans during your initial six-month grace period is that you must start makingy our payments right away. This can be difficult if you have notfound a job after graduation, although you can wait until just before the grace period ends to consolidate, and still receive the lower rates. Furthermore, once you have consolidated your student loans, you cannot "un-consolidate" them again, so make sure to consider your choice carefully.
How is Interest Calculated When I Consolidate Student Loans?
When you consolidate student loans, your lending company paysoff your government loan and issues you a new loan under its ownname. The typical way to determine the interest rate on the newloan is to take the average interest rates on all of the studen tloans, and offer a new rate that is an eighth of a percentage point higher (up to a maximum interest rate of 8.25%).
Although agreeing to a higher interest rate might not sound likea good reason to consolidate student loans, this rate is fixedover the life of the loan, whereas the government rates willfluctuate. Since rates are at an all time low right now, lockingin the current rates might be a good idea. Furthermore, manybanks give you ways to bring down the percentage rates. For example, some lending institutions will drop the rate by as much as a quarter point if you agree to automatic deductions from achecking or savings account, whereas others drop the rates aftera certain number of timely payments. As an additional bonus,there is no penalty for paying off your consolidated loan early.
When Would You *Not* Want to Consolidate Student Loans?
Before you decide to consolidate student loans, you should carefully consider your alternatives. For example, did you realize that it might be possible to have your student loan cancelled altogether? Student loan forgiveness options include volunteering, for the Peace Corps for example, or working for the government in a low-income area as a teacher or doctor.Cancellation is not possible, however,
It?s July 23rd, Do you know where your loans are?
Did you know that because nearly all private student loans have variable APRs, your interest rate could have changed several times in the past 2 years?<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/W35fIg6RTdE" height="1" width="1"/>
Confused about reform and consolidation?
If you’ve heard the word about the reform currently in progress across the country, you probably are aware of the end of the FFEL program and exclusive federal consolidation returning to the Department of Education. If not, read this page on upcoming changes to get acclimated.
One question we get a lot is, “If FFEL is [...]<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/gtij4UUkuQQ" height="1" width="1"/>
New Grads, Start Thinking About Consolidation
Consolidation has two main benefits that can be of enormous financial help to you both in the present and the future: the improvement of your credit rating and lower net monthly payments.<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/IRMnvwwn14w" height="1" width="1"/>
What NOT to do when Consolidating your Student Loans
There are a great many benefits to consolidating your student loans, such as the convenience of making one or two monthly payments as opposed to six or seven, the lower monthly payment. But there are some cases where you have to be careful.<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/hVsxcx5MHFg" height="1" width="1"/>
Graduating? Consider student loan consolidation.
Depending on the amount (and type) of loans you took out for school and the repayment plan you selected, the monthly payments may still be out of your reach by the end of your grace period.<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/TfWhN3LYYvM" height="1" width="1"/>
Should I Consolidate my Private Student Loans?
Federal student loan consolidation is fast, easy, free and highly recommended to lower your monthly payment. Private student loan consolidation is a bit trickier. Here are some notes to remember if you choose to go down this road.<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/pI-n1mZXjYQ" height="1" width="1"/>
How to Get Your Student Loans Forgiven
Imagine waking up tomorrow and discovering you don't need to pay back your federal Stafford, PLUS and Perkins loans. For many Americans, that dream is a reality, thanks to a number of programs that allow you to have some, if not all, of your loans forgiven.<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/_jiatW1gU4M" height="1" width="1"/>
From Our Forums: Consolidation Question Quartet!
There was a great question in our loan consolidation forum this week from a new user with lots of loans from medical school. James recently finished his Master’s degree as a physician assistant (congratulations!) and wrote to us looking for some consolidation advice:
I have the following types of federal loans:
Subsidized Stafford
Unsubsidized Stafford
Grad PLUS
Previously consolidated federal [...]<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/VhRoT8EQlBg" height="1" width="1"/>
Have a Consolidation Question?
If you aren’t already familiar with our Financial Aid Forum, it is an awesome resource for answering questions about virtually every kind of financial aid or loan a student can take out toward their education.
We have three dedicated Student Advocates (myself included) that are available Monday-Friday to help out and an informed user base of [...]<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/fVbQFYIEPhQ" height="1" width="1"/>
Did you know you can get IBR on a Federal Loan Consolidation?
It’s true! If you are unfamiliar with Income Based Repayment (IBR), I would recommend reading my blog and then consulting the Student Loan Network’s handy payment estimator chart under the new repayment plan.
Why is IBR better than the normal plan?
There are a couple reasons why. First, IBR takes your income into account when it computes [...]<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/2ZG78P0peWg" height="1" width="1"/>
after you have consolidated your student loans. If this kind of work interests you and is available, it could be a better option than loan consolidation.
Another time to hesitate before you choose to consolidate student loans is when you are close to finishing your payments.Stepping up the payments and saving yourself some interest and the hassle of consolidation might be more advantageous to you.
Finally, there are that you might want to keep openbecause they offer special advantages. For example, if you are considering going back to school and you have a Perkins loan,you would not want to consolidate that with your other studentloans.
The government will pay all interest on Perkins while youare in school, but if you have chosen to consolidate studentloans, you will not be able to receive this benefit. You could always choose to leave any special kinds of out of theconsolidation mix, however.
About the author:About the author Mark Kessler..His website is quickly becoming recognized for it's wealth of information and resources oneverything you need to know about student loans. Check it outright away, your bank account depends on it! Go to ==> Student 411
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