Sunday, December 12, 2010
Student Loan Consolidation Options
Getting a college education is very expensive. For many, student loans are taken out to pay for the tuition and other expenses required to get a degree. Graduates are faced with multiple loan payments, some with high interest rates. In an effort to ease the burden, many seek student loan consolidation which merges all loans into one. This creates one monthly payment instead of several. It also can reduce the rate being paid on the loans. There are two options for consolidation, the federal government or finding a private institution that does it.
The eligibility requirements for a student loan consolidation from the federal government are few. A person wishing to consolidate must have at least one Federal Direct Loan or one Federal Family Education Loan in order to use the government program. Consolidation is not allowed for students still in school or loans that are in default. There are, however, certain criteria that when met will allow loans in default to be consolidated. Consolidating with the federal government gives the borrower one monthly payment and four payment options. There are no fees or restrictions and does not require the borrower to be employed or have collateral.
There are both positive and negative factors in getting a student loan consolidation from a private institution. The loans will be consolidated with one lender resulting in one payment per month. What rate the loan will have is dependent on the borrower’s credit score, meaning the rate may increase if the score has gone down. A better rate will lower the payment. Unlike federal consolidation, ones from private institutions have loan origination fees. Also, private loans are not forgiven if the borrower dies while still paying on the debt.
With the cost of higher education these days, acquiring student loans is almost unavoidable. No matter which student loan consolidation option a borrower chooses, they should fully consider the ramifications of each. The benefits of consolidation both to recent graduates and those who have been out of school for some time should be weighted against any fees, higher rates and longer pay-off periods to ascertain which is the best option.
The eligibility requirements for a student loan consolidation from the federal government are few. A person wishing to consolidate must have at least one Federal Direct Loan or one Federal Family Education Loan in order to use the government program. Consolidation is not allowed for students still in school or loans that are in default. There are, however, certain criteria that when met will allow loans in default to be consolidated. Consolidating with the federal government gives the borrower one monthly payment and four payment options. There are no fees or restrictions and does not require the borrower to be employed or have collateral.
There are both positive and negative factors in getting a student loan consolidation from a private institution. The loans will be consolidated with one lender resulting in one payment per month. What rate the loan will have is dependent on the borrower’s credit score, meaning the rate may increase if the score has gone down. A better rate will lower the payment. Unlike federal consolidation, ones from private institutions have loan origination fees. Also, private loans are not forgiven if the borrower dies while still paying on the debt.
With the cost of higher education these days, acquiring student loans is almost unavoidable. No matter which student loan consolidation option a borrower chooses, they should fully consider the ramifications of each. The benefits of consolidation both to recent graduates and those who have been out of school for some time should be weighted against any fees, higher rates and longer pay-off periods to ascertain which is the best option.
Student Loan Consolidation
Student loan consolidation is a practical repayment tool that combines your student loans into one master loan, significantly reducing your monthly payment (up to 50% in some cases!). Take a look at how much you can save each month with our student loan consolidation calculator.
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