Student Loan Consolidation – How Does It Work? By: Vanessa McHooley Student loans are a great source of financial aid for students who need help paying for their education. Unfortunately, students often leave college with burdensome debt. In addition, they often have multiple loans from different lenders, meaning they are writing more than one loan repayment check each month. The solution to this problem is loan consolidation. What is loan consolidation? Loan consolidation means bundling all your student loans into a single loan with one lender and one repayment plan. You can think of loan consolidation as akin to refinancing a home mortgage. When you consolidate your student loans, the balances of your existing student loans are paid off, with the total balance rolling over into one consolidated loan. The end result is that you have only one student loan to pay on. Both students and their parents can consolidate loans. Should I consolidate my loans? Loan consolidation offers many benefits: - Locks in a fixed, usually lower, interest rate for the term of your loan, potentially saving you thousands of dollars (depending on the interest rates of your original loans) - Lowers your monthly payment - Combines your student loan payments into one monthly bill In addition, consolidated loans have flexible repayment options and no fees, charges, or prepayment penalties. There are also no credit checks or co-signers required. You should consider consolidating your loans if the consolidation loan would have a lower interest rate than your current loans, particularly if you are having trouble making you monthly payments. However, if you are close to paying off your existing loans, consolidation may not be worth it. How will the interest rate for the consolidated loan be? The interest rate for your consolidated loan is calculated by averaging the interest rate of all the loans being consolidated and then rounding up to the next one-eighth of one percent. The maximum interest rate is 8.25 percent. To figure your interest rate, visit loanconsolidation.ed.gov for an online calculator that will do the math for you. How much can I save? How much you save by consolidating loans depends on what interest rate you get and whether you choose to extend your repayment plan. According to Sallie Mae, the leading provider of student loans in the United States, consolidating student loans can reduce monthly payments by up to 54 percent. However, the only way to reduce your payment this much is to extend your repayment plan. You typically have 10 years to repay student loans, but, depending on the amount you're consolidating, you can extend your repayment plan all the way up to 30 years. Remember that if you choose to extend your repayment term, it will take longer to pay off your overall debt and you'll pay more in interest. There are no preypayment penalties, so you can always choose to pay off the loan early. Am I eligible to consolidate my loans? In order to consolidate your loans, you must meet the following criteria: - You are in your six-month grace period following graduation or you have started repaying your loans - You have eligible loans totaling over $7,500 - You have more than one lender - You have not already consolidated your student loans, or since consolidation you have gone back to school and acquired new student loans The following types of loans can be consolidated: - Direct Subsidized and Unsubsidized Loans - Federal Subsidized and Unsubsidized Federal Stafford Loans - Direct PLUS Loans and Federal PLUS Loans - Direct Consolidation Loans and Federal Consolidation Loans - Guaranteed Student Loans - Federal Insured Student Loans - Federal Supplemental Loans for Students - Auxiliary Loans to Assist Students - Federal Perkins Loans - National Direct Student Loans - National Defense Student Loans - Health Education Assistance Loans - Health Professions Student Loans - Loans for Disadvantaged Students - Nursing Student Loans Where can I get a consolidation loan? You can consolidate your loans through any bank or credit union that participates in the Federal Family Education Loan Program, or directly from the U.S. Department of Education. The loan terms and conditions are generally the same, regardless of where you consolidate. You may want to check first with the lenders that hold your current loans. If all your loans are with one lender, you must consolidate with that lender. If you decide to consolidate your student loans, remember that you can only do so once unless you go back to school and take out more loans. Therefore, you will want to make sure you get the best deal the first time. The interest rate will be the same from all lenders, but some lenders may offer future rate discounts for prompt payment and a discount for having monthly payments directly debited from your account. Can my spouse and I consolidate our loans together? You can consolidate your loans together, but it is not a good idea for a couple reasons: - Both of you will always be responsible to repay the loan, even if you later separate or divorce - If you need to defer payment on the loan, both of you will have to meet the deferment criteria When should I consolidate my loans? You can consolidate your loans any time during your six-month grace period or after you have started repaying your loans. If you consolidate during your grace period, you may be able to get a lower interest rate. However, since you will lose the rest of the grace period, it is a good idea to wait until the fifth month of the grace period before consolidating. The consolidation process usually takes 30-45 days. This article is distributed by NextStudent. At NextStudent, we believe that getting an education is the best investment you can make, and we're dedicated to helping you pursue your education dreams by making college funding as easy as possible. We invite you to learn more about how to get Student Loan Consolidation at http://www.NextStudent.com . About the Author: My goal is to help every student succeed - education is one of the most important things a person can have, so I have made it my personal mission to help every student pay for their education. Aside from that, I am just a pretty average girl from SD. http://www.nextstudent.com/

Inside Finance 7 Things To Consider Before You Invest   Some investment things are been discussed in this article. Investing your money wisely allows you the opportunity to both grow your capital over time as well as providing you an additional source of regular income and there are many excellent high yield investments available today. However, before you enter this particular world, think carefully about whether or not you really want to, and can afford to, play the investment game. Tips For Free Prepaid Debit Card   Lots of families and folks want to save the money and manage their funds. But with everything that seems to be necessary, this can be difficult to do. And this is where a free prepaid debit card can help take the hassle out of money management and keep some change in their pockets. How Buy-New Or Used Car-Poor Credit   How to buy new or used car with poor credit. The car dealership doesn’t know your credit history, so they are willing to offer you the better deals. Remind salesperson you can afford to look at other dealerships. Investment Plans For The Stock Market   Investment plans are useful for the stock market. The proven stock market investment plan has already done the work for you, and the predetermined goals that you set for yourself will give you the desired power too fulfill them. An investment plan should be geared toward receiving both ever-increasing dividends, as well as stock appreciation. Back Up Plan   Let's discuss on businesses lessen staff when sales drop and they can no longer sustain to pay the same number of people they have on their payroll. No organisation – not even a big, established business – is immune from the need to become leaner in an ever-increasingly competitive market environment.