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Taking Advantage Of A Federal Student Loan Consolidation Program
By: Mark Woodcock iSnare Expert Author [See Author’s Biography]
Earning a college degree is one of the most important - and expensive - things
you will do in your life. If you are able to attend college without having to
take out any student loans, you are one of the lucky few. Most individuals have
to borrow at least some of the money they need for tuition, books, and living
expenses. And upon graduation, you are faced with the challenge of repaying all
of those loans after the grace period ends, whether you are employed or not.
That can be a hard dose of reality when you realize that not paying your loan
payments on time, or not paying them at all can have grave consequences where
your credit rating is concerned. That is why it is smart to consider a federal
student loan consolidation program.
Loan consolidation entails taking out a single loan in order to pay off several
others. This is done for convenience, as you can often get a lower interest
rate, and you only have 1 monthly loan payment to keep track of. It is also good
for your credit history. Often, student loans are guaranteed by the United
States government. With a federal student loan consolidation program, currently
held loans are purchased and closed either by a loan consolidation company or by
the U.S. government. Who handles the loans depends upon what type of federal
loans the borrower has.
The interest rates for Federal student loan consolidation programs are very
reasonable. They are lower than your average bank loan. They are calculated
based on the current year's student loan interest rate, and in turn calculated
based on the 91-day Treasury bill (a government bond used as a debt-financing
vehicle of the U.S. Federal government) rate at the previous auction (held every
year in may) of the year. The interest of student loans are variable, but can
not go over the maximum of 8.25% for Stafford Loans and 9% for PLUS loans
(Federal parent loans).
Student loan consolidation programs are available to former students who have
more than a minimum amount of federal student loan debt (usually more than about
$10,000). Parents with more than a minimum amount in PLUS loan debt are also
eligible to consolidate.
If an individual chooses to consolidate his or her federal student loans, the
loans can be consolidated through a private lender, and the borrower can only
consolidate again through the U.S. Department of Education. Upon consolidation,
the loan is charged a fixed interest rate that does not change even if the loan
is reconsolidated. And, with a federal student loan consolidation program, there
are no fees applied or closing costs to be paid. This differs from private
lender debt consolidation.
Taking advantage of a federal student loan consolidation program can be
beneficial to your credit history, by helping it stay clean. It is easier to
keep track of and remit 1 monthly loan payment than to keep track of 2 or more
student loan debts, especially if you move frequently. And losing track of a
federal loan is never a good idea.
Loan consolidation is especially good if you are having trouble making all of
your scheduled loan payments on time. Defaulting on your student loans is a very
unfortunate situation to be in, and can lead to having property and possessions
taken from you in order to pay the debt. You can also consider requesting loan
forbearance from your lender, which allows you to take a break from your
payments, or make interest-only payments. However, the longer you wait to pay
your debt, the longer it will be hanging over your head. With consolidation,
repayment is extended over a longer period of time which, in addition to the
single lower interest rate you will have on your loan, they payment are lower
and more manageable within your budget.
If you are interested in a student loan consolidation program, you can consult
the U.S. Department of Education, or one of the lenders with whom you currently
have a student loan for information. During the application process, you can
learn exactly which of your loans qualify for consolidation (hopefully they all
do!), and be on your way to more manageable student loan payments.
About the Author:
Learn the essential information for picking the right consolidation service at
Student Loan Consolidation Program |
