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,
From our Archives: Consolidation
For upcoming college graduates, the daunting task of paying off students loans is not far away. In a mere six months after graduation, paying off these loans will become a reality. That makes it the perfect time to begin to consider student loan consolidation. Here are some great articles from our archives with tips and tricks to guide you in the consolidation process.<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/4Xf-lvJtujU" height="1" width="1"/>
Most popular student loans for college
Not everyone is aware of all the loan options available to pay for college. For an overview of federal and private sources of credit used to pay for college, view these links! Here are just a few options to consider...<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/zk_zkVsb4KU" height="1" width="1"/>
How to Avoid Student Loan Defualt
Navigating student loan payments can seem daunting. Before you know it, you've graduated and need to start making payments. So what happens if you are unable to make your monthly payments? You can soon find yourself in default. Learn how to avoid this dilemma.<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/O6Rdd4nk6zU" height="1" width="1"/>
What Will My Student Loan Consolidation Rate Be?
TweetDepending on the type of student loans you will be consolidating, the interest rate can vary greatly. For instance, federal student loan consolidation allows you to obtain a fixed interest rate based on the weighted averages of your existing loans. Private student loan consolidation is much harder to nail down. Federal Student Loan Consolidation Rates [...]<img src="http://feeds.feedburner.com/~r/StudentLoanConsolidationHotTopics/~4/mEG217t3Pv0" height="1" width="1"/>
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?
TweetIf 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 [...]<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"/>
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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