Student Loans - Loan Consolidation

When you choose the path of loan consolidation for your school loans, you are choosing to have them grouped together, under a single interest rate, but with a single, chosen lender.

Most people enjoy the chance to consolidate student loans, simply because it makes their debt a lot more manageable. Specifically:

• They have only one loan payment they need to make, rather than multiple
  
• The interest rate is fixed over the duration of the loans (Federal loans are fixed at 6.8%)
  
• It can lower the monthly payment due to the loan being extended

There are pros and cons to student loan consolidation. On the upside, if the interest rate go up, your interest rate stays put. On the other side of the coin, if interest rates plummet, you're stuck with your fixed interest rate, even though it may be higher.

Things To Keep In Mind

Make sure that your loans can even be consolidated. It tends to be no problem at all with federal loans, including FFELP loans (which include Stafford, PLUS, and SLS loans), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans  (or Stafford Loans) and Direct loans.

Calculate what your consolidated rate would be to determine if it would be beneficial to look into student loan consolidation at all. You interest rate for the cosolidation loan is determined by averaging the interest rates of all your loans. You may not choose to include any of your loans with high interest rates.

Federal Loan Consolidation

A nice aspect of consolidation of your Federal Student loans is the repayment period is extended from 10 years to 30 years. This, again, allows for much lower monthly payments.

Private Student Loan Consolidation

Always get your federal loans consolidated before you tackle your private loans. The reason for this is, since the federal loan interest rate is much lower, as you pay into getting rid of it, your credit score is going to get a nice boost.

While the interest rate for private loan consolidation tends to be higher than federal loans, you should still be able to get a nice rate. The Prime Rate is usually about 8.25%.

With a private loan, you get have a co-signer, thus giving you the leway to get a larger loan. After 2 years, the co-signer can be released from any obligation and the loan company will tend to look more favorably toward you when you do eventually consolidate your private loans.

How Do You Get The Ball Rolling?