Ways to Find the Best Student Loans Consolidation

When it comes to student loans, too much can be a bad thing. While carrying several different loans at once will force them to be paid off quicker, the combination of monthly payments is often too much for new graduates to bear, sucking up much of their entry level paychecks during a time when they should be enjoying life. Also, the amount of paperwork and organization needed to juggle several loans at once can be a pain; from making sure that each loan is paid on time every month, to dealing with several different 1098 statements when tax time rolls around.

Thankfully, there are several solutions in existence today that allow borrowers to consolidate student loans. Whether through the government, or through a private company eager to increase its student loan portfolio, student loans are easy to combine together into one monthly payment that is lower than the total amount of the payments made on the previous loans.

Many lenders offer solutions to consolidate private student loans into one. Often, monthly payments can be reduced by half, while extending the period of time needed to pay off the balance. One thing to look for in a deal like this is the lack of any fees or prepayment penalties. It is usually not worth the effort of consolidation if the borrower has to pay these types of fees, as any benefit would be swallowed up by this additional outlay. And prepayment penalties are even worse, as this guarantees that the lender will earn the total amount of interest due on the loan, even if it is paid off early.

But the very best student loans consolidation is done through the government. Students who have taken out federal loans through the U.S. Department of Education are eligible to consolidate their loans via the same system that they used to originally take out their multiple loans. With a Direct Consolidation Loan, borrowers have more flexibility in options to repay the loan, with four different plans to choose from.

With the standard repayment plan, borrowers pay fixed monthly payments that are spread out over a period of time, not to exceed ten years. This type of repayment is generally what one would find with a private lender as well. The extended repayment plan, however, will spread the repayment of the loan out over a longer period of time that ranges from twelve to thirty years, with a fixed monthly payment that is less than the payment under the Standard Plan. Or, for a hybrid of the two plans, the Graduated Repayment Plan still has the longer repayment period, but steadily increases the monthly payment amount every two years, to shorten the life of the loan. And finally, the Income Contingent Repayment plan is based on the borrower's annual income, total federal student loan debt, and family size. Based upon these factors, the payments are fixed to an appropriate level and spread out over a period up to twenty-five years.

So for the best student loans consolidation plan, the U.S. Department of Education is the right source. Borrowers should take note, however, that combining federal loans into a private consolidation loan is generally not a good idea, as they will give up the benefits that go along with having government loans, such as low interest rates, and flexible repayment plans.