Learning About Student Loan
Consolidation Services
There are a number of options out there
for students who need to borrow money for college. The
Federal government makes a large amount of funds available
each year to students all over the country in the form
of federal student loans such as Stafford loans, PLUS
loans and ROTC plans. There are also private options
available that are administered by banks and other types
of financial institutions such as Citibank and Sallie
Mae. In most cases, these are unsecured loans that will
usually be at higher interest rates than federally funded
loans. Often, students run into problems being able
to meet the monthly payments of their student loans,
especially if they have many different loans outstanding
through a number of different sources. Being able to
meet three or four different monthly payments can tax
the finances of a recent graduate who has either not
found a job yet, or is just starting out in his/her
field.
Thankfully, there are ways to consolidate student loans
into one loan, lowering the total monthly payment to
a more manageable amount. Federal loans are the easiest
to do this with, as the federal government offers a
solution through its own lending arm that streamlines
the process of debt consolidation. To be eligible for
federal student loan consolidation, one has to be no
longer enrolled in school, and must be either in the
grace period of the loan, or actively repaying it.
There are private student loan consolidation services
as well, which are geared toward privately funded loans
such as those from banks. If the borrower has a mixture
of federal loans and private loans, it is important
to keep the two types separate, as federal consolidation
typically involves a lower interest rate and better
repayment terms. Refinancing federal loans through a
private service will squander any benefits that the
borrower may have had through the federal system.
It can also be beneficial to consolidate private student
loan debt at well, even though the interest rate may
not be as favorable as that acquired through the federal
process. Reducing the number of institutions that require
a payment each month can greatly reduce the monthly
outlay that the student is required to come up with.
Also, an interest rate on the new loan that is lower
than the average rate on the existing private loans
is sometimes possible to achieve.
A disadvantage of consolidation can be that the loan
is spread out over a longer period of time, increasing
the total amount due to the loan issuer. Also, the interest
rate could rise if the general interest rate climate
has gone up since the original loans were taken out.
Even though the monthly payments might be lower than
before, it would mean more money out of the borrower's
pocket in the long run.
Overall, using a student loan consolidation service
can be a beneficial thing to do, especially to one who
may not be able to afford his/her current situation.
It's important though, to never mix federal and private
funds, as doing so may result in a loss of the benefits
that government loans can offer.
