Consolidating Private And Federal Student Loans

What Is A Consolidation Loan?

A consolidation loan is a type of student loan where both private and federal loans are consolidated into one single loan. When taking out several different types of loans you may find yourself paying a lot of interest over time. By consolidating your debt under one loan, you could potentially save money each month if you pay off the loan early. You should consolidate your loans only after carefully weighing the pros and cons. 2. How To Know If Your Loan Can Be Considered For Consolidation

There are some loans that cannot be considered for consolidation. You need to ask yourself whether you can afford the monthly payments of your current loans. Are they getting paid off easily and do you have enough money left over at the end of the month to cover any additional fees? You will want to make sure that you don’t get stuck having to go back to school just because you weren’t able to consolidate your loans.

Should You Consolidate Student Loans?

After determining that you qualify financially for consolidation, there are still many factors that should be taken into consideration. Do not consolidate your loans unless you plan on making timely payments. Not doing so would mean losing the benefits associated with consolidation and putting your credit history at risk.

Why Consolidate Student Loans?

When deciding whether or not to consolidate student loans a number of things should be considered including how much money you owe, what your payment options are, and what the future holds for you. Depending on your financial situation you may be able to lower your total amount of debt by consolidating your loans. It also helps to reduce your interest rate. Interest rates are lower when you combine your loans together.

Will My Credit Score Take a Hit From Consolidating Student Loans?

As long as you maintain good grades while enrolled in college, your credit score won’t be affected much by consolidating your loans for a longer period of time. Also remember that you might want to consider going to school on a deferred basis rather than finishing right away. This way you have more time to repay your loans without affecting your credit rating.

Consolidating Private And Federal Student Loans

Consolidate Your Loan

The best way to consolidate student loans is to start early, while you are still enrolled in school. You’ll pay less interest than if you wait until after graduation. But remember, consolidation isn’t always right for everyone. If you have debt from private banks or credit card companies, you should probably leave them alone. Those lenders have their own repayment plans.

Find Out Exactly What Interest Rate You Qualify For

Once you know what type of loan you qualify for, you can find out whether the government offers a lower rate. Most federal student loans offer 8 percent interest rates, while some state-sponsored loans go down to 5.9 percent. You also need to make sure you qualify for the lowest possible payment plan. Don’t worry about a lump sum at first. Wait until you graduate to try to get rid of your debt.

Apply For More Than One Type Of Loan

If you want to borrow money from the U.S. Department of Education, you may be able to apply for both Direct Subsidized and Unsubsidized loans. These types of loans offer much better terms than standard PLUS loans. Direct Subsidized loans require no paperwork and allow students to take out a fixed amount of money each month. Unsubsidized loans do not have any restrictions, but they also carry higher interest rates.

Avoid Paying Too Much In Fees

When you’re looking at how to consolidate student loans, fees play a big role. You’ll want to avoid paying high fees for things like missed payments, late payments, and defaulted loans. Luckily, many companies let you pay off your debts without incurring additional charges. Shop around for the cheapest option and ask lots of questions before signing anything.

Know When To Reapply For A Refinance

You’ll want to reevaluate your situation once a year to determine whether refinancing makes sense. Sometimes, your financial situation may change, or you may decide to enroll in a cheaper program. You may even decide that it’s time to consolidate your loans. Be careful, though; you don’t want to end up with a balloon payment. Check your status frequently so you can catch mistakes before they cost you extra money.

Ask About Other Programs

In addition to consolidating student loans, you should look into other programs that help people pay back their loans faster. These include income based repayment options and Public Service Loan Forgiveness. Income Based Repayment means you pay according to your income level instead of the original loan amounts. This lets you pay less interest and save money over time. Public Service Loan Forgives all remaining debt after 10 years of public service. These programs aren’t always applicable to everyone, but they may be worth checking out.

Consolidating Private And Federal Student Loans

Consolidation

This is the first step towards consolidating private student loans. If you have a lot of debt, consolidation may offer many benefits. First off, it could lower the interest rates you pay and remove some of the confusing paperwork. Secondly, it could make payments easier and help you get out of debt faster. Finally, consolidation means that you only owe one company, instead of several.

Lenders & Rates

Your lender will determine the best rate and terms for you. You should choose the lowest possible rate and terms for your loan. Also, if you’re not sure what kind of loan you want to take out, you might want to consider borrowing money through a credit union. As long as you use the right amount and type of collateral, they can often give you better rates than banks can.

How To Do It Yourself

If you decide to do it yourself, you can look into companies like LendUp and LearnVest. Both sites offer free tools to consolidate your federal and private student loans. You can also contact a nonprofit organization to ask about options for paying back your student loans at no cost.

Loan Consolidation Helpers

Some people decide to hire someone else to work with them through their consolidation. There are plenty of firms who specialize in helping people with student loan debt, including LendingTree, Sallie Mae, and QuickenLoans. These services can help you find the best deal for your situation.

Consolidating Private And Federal Student Loans

How did we get here?

In the United States, student loan debt grew from $400 billion in 2006 to nearly $1 trillion today. That’s an increase of over 1,000%. In fact, student loans now make up 45% of total consumer debt and they have been increasing at a rate of 10% per year since 2010.

Today, many Americans find themselves buried under massive debts and unable to pay them back due to low wages, high unemployment rates, and rising costs of living. According to the New York Federal Reserve Bank, the average student borrower carries $37,172 in debt and graduates carry an average of $28,500 in debt.

The problem gets worse if you take out private student loans rather than federal ones. A recent study indicated that 44 million borrowers who took out private loans had their payments increased last year alone; the average borrower paid about $300 more per month.

Is consolidation the answer?

Yes! However, not everything is perfect when it comes to consolidating student loans. Here are some things you should be aware of before making any decisions:

Interest Rate: You may think that taking out private loans means paying less interest, but it’s actually the opposite. Most students end up paying higher interest rates as a result of consolidation.

Credit Score: As long as you don’t have bad credit, having a lower score shouldn’t hurt your chances of getting approved for a loan. But if you do have poor credit or bankruptcy, consolidating your loans may just cost you thousands of dollars in fees and interest.

Repayment Options: If you decide to consolidate your loans, keep in mind that the options offered to you depend on whether they are federal or private loans. While federal loans offer several repayment options, private loans often only provide two (10 years and 20 years).

Loan Selection: Make sure you choose a lender you trust. Do research online and ask friends and family for recommendations. There are certain websites that compare lenders and let you know what kind of terms each offers.

Income Based Repayment Program: There are income based repayment programs offered by the Department of Education to those who qualify. These allow you to pay down your balances faster while still receiving payments based off your income. However, these options aren’t always offered by private companies.

If you want to consolidate your student loans, check out www.studentloans.gov.

Consolidating Private And Federal Student Loans

How do I consolidate student loans?

Most private and federal student loan companies offer programs that allow borrowers to consolidate their loans at one low monthly payment. A consolidation program simplifies repayment options and may help prevent default. You’ll often find many different consolidation loan programs offered by various lenders. However, not all of them have the same terms, rules, and requirements. So, before consolidating, make sure you know what you’re getting yourself into. If you’ve consolidated before, you should know what pitfalls to avoid. Here are some things to consider:

What types of loans can be consolidated?

You can generally choose between private (you borrow directly from the lender) and federally guaranteed (borrowed from the U.S. Department of Education) student loans.

Can I consolidate my own loans?

No. Typically, only the person who holds the original loan documents can enroll in a consolidation plan. In addition, no matter how much money you owe, you cannot borrow more than your current total credit limit from any single lender. But, if you want to pay off as many loans as possible, you may qualify to consolidate multiple loans. To get started, check out our Student Loan Consolidation Guide.

Are consolidation plans free?

Yes. Most lending institutions offer these services without cost since they save them time and money.

Do consolidation plans lower my interest rate?

If you use a fixed-rate loan, then yes.

Will my payments go down?

Not necessarily. Even though you are paying just one monthly bill, you still need to repay the principal balance of each loan you consolidated. Therefore, your payments may stay about the same.

When will my consolidation start?

Once you apply, you’ll receive a notice, usually within three business days, saying whether you were accepted or denied. If you were approved, you’ll be able to begin making payments immediately.

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