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Tag Archive: federal student loan

  1. Consolidate student loans

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    Even though student loans are not what they used to be and they are no longer seen as an absolutely safe solution to financial difficulties, depending on your specific financial situation, consolidating your student loans may still bring you certain benefits. For instance, if you are dealing with a number of student loan payments, consolidating your student loans can really make your life a lot easier by simplifying your payments to just a single monthly payment.

    By consolidating your student loans, you are basically combining them all into a brand new, single student loan. Which means that instead of having to keep track of multiple student loan payments every month, you will be able to focus only on a single loan payment, which can ultimately reduce part of your financial stress, as well as make it easier for you to make your payments on time.

    By consolidating your student loans into a single larger loan, you may also be able to get better loan terms, including a lower interest rate on your new loan. Below, we will look at some of the advantages and disadvantages of consolidating student loans so that you will be better equipped to make the right decision for your financial future.

    What you should know about consolidating your student loans

    Since every person’s situation is different, the reasons for a student loan consolidation can also be different. Here are some of the things that you should know in case you are considering consolidating your student loans:

    • One of the main reasons to choose a student loan consolidation is to keep yourself organized. If you think that having a single monthly payment instead of multiple payments to think about and take care of each month is going to help you to organize and better structure your time and budget, then consolidating your student loans is surely going to be a good move for you.
    • You should know that since your current loans already have a fixed interest rate, if you want to use a Federal student loan consolidation for these loans, you will not be able to save any money on interest. By choosing a longer repayment term, you may be able to lower your monthly payment a bit. But this way, you will end up paying more money in the long run.
    • If you decide to consolidate your loans through the services of a private loan lender, you may be able to save some money, however, you may also end up giving more money depending on the interest rate that you are going to get on your private student loan. In order to qualify for a private student loan with a lower interest rate, you will need to have a good credit score. You may be able to get a variable rate private student loan with a lower interest rate, but keep in mind that this could change as the interest rate may increase in the future. With a fixed rate private student loan, you will have a slightly higher interest rate from the beginning, but at least you will know that the interest rate will not go higher with time.
    • Generally, unless you are able to qualify for a private student loan with great loan terms, you should stay away from private student loans and go with federal student loans instead. Even though with federal student loans, you will not be able to get a lower interest rate, they have some benefits that private loan lenders simply not offer you.

    How to consolidate student loans

    Consolidating your loans basically lets you combine all your current loans into a new, larger loan. By paying this single monthly payment, you will be taking care of all your loans at the same time. As you already know, there are mainly two ways to consolidate your loans. You may choose between consolidating your student loans through a federal or a private loan lender.

    • Federal Student Loan Consolidation

    You can use federal student loan consolidation for your federal student loans. With federal student loan consolidation, you are able to consolidate pretty much any federal loan by using a direct consolidation loan program. You should, however, keep in mind that you will not be able to include any of your loans from private lenders as well as any of your PLUS loans, that have been borrowed by your parents on your behalf.

    In order to consolidate your federal loans, you will most likely not have to go through a credit check, and you will be able to consolidate your federal student loans when you have graduated, left your school, or if you have dropped below the minimum required enrollment. Even though a federal student loan consolidation loan’s interest rate is fixed for the whole period of the loan, that interest rate may differ from one person to another, depending on that person’s specific financial situation. The interest rate that a federal student consolidation loan has is based on the interest rate of the loans that the person is going to consolidate.

    • Private Student Loan Consolidation

    There are many private loan lenders out there who offer student loan consolidation. Some of these private loan lenders may even let you include some of your federal loans in the private consolidation loan they are going to give you. What you get with a private loan lending company depends highly on your credit score. Having a good credit score will allow you to qualify for a private student consolidation loan with better terms, including lower interest rate. The interest rate on a private student consolidation loan may be variable or fixed.

    A private student consolidation loan with a fixed interest rate will have a higher interest rate from the get go, but that interest rate will not change with time. Therefore, you will know from the very beginning how much you are going to need to pay in order to repay that loan. With variable interest rate private student consolidation loan, the situation is a bit different. You may be able to get a lower interest rate at the beginning, but over time, that interest rate may rise and you could very well end up paying more money than you would have to pay for a fixed interest rate private student consolidation loan with a higher starting interest rate.

  2. Student loans consolidation

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    When talking about student loan consolidation, there are two main types that you should be aware of – private student loan consolidation and federal student loan consolidation. Both processes are often being mixed up. They are in fact quite different.

    • Private student loan consolidation, also known as student loan refinancing, is a financial process that you take on by using the services of a private lender. If you have a good credit score, you may be able to qualify for better loan terms and save a significant amount of money with a lower interest rate student loan.
    • Federal student loan consolidation is when you take out a student loan through the Department of Education. In order to be eligible for certain federal loan repayment programs, you may need to consolidate, h. However, federal consolidation will not save you any money or in any way lower the interest rate that you are paying.

    The basics of private student loan consolidation (student loan refinancing)

    Student loans consolidation

    Student loans consolidation

    Private student loan consolidation (or student refinancing) is a replacement of several student loans (federal, private or a combination of both) with a new, single private loan. By doing that, if you manage to get a lower interest rate and fees on your brand new private student loan, you will be able to save a significant amount of money. What will ultimately determine your private student loan terms is the state for your credit score, job history, monthly income and educational background. All these factors will determine the interest rate of your private student loan. What you usually need to qualify for a private student loan is a credit score that is in the mid 600s.

    The interest rate that you would be able to get with such credit score will vary between 2% and 9%. It is very important to understand that if you decide to refinance your federal loans into a new private loan, you will automatically lose the privileges that federal student loans have. Such federal student loan privileges include interest-free deferment, access to various federal loan forgiveness programs as well as income-driven repayment. If you have made up your mind and you are ready to begin the procedure for your private student loan consolidation, make sure you compare what different private loan lenders are offering you so that you can choose the one that offers you the best loan terms with the lowest interest rate.

    Basics of federal student loan consolidation

    Basics of federal student loan consolidation

    Basics of federal student loan consolidation

    If you decide to consolidate federal loans, they will be repaid by the government and then the will be replaced by a single consolidation loan. Normally, you are eligible for a federal consolidation loan once you have graduated, left school or if you have dropped below half-time enrollment. To consolidate your federal loans through the Department of Education will not cost you a thing, which is a big advantage compared to private companies that will charge you a certain fee to consolidate your loans.

    When consolidating federal loans, the new fixed interest rate that you will get is going to be the weighted average of all your previous rates, all of them rounded up to the next an eighth of 1%. For example, if the average of your previous rates is 6.05%, your new interest rate is going to be 6.15%. You will also get a brand new loan term with a duration of between 10 and 30 years. Normally, your repayment term will start within 2 months from the date your consolidation loan was first disbursed and will then be based on your overall federal student loan balance.

    Consolidating federal student loans

    According to the website of the Federal Student Aid, it takes up to 30 minutes to apply for a federal student loan consolidation for most borrowers. As part of the application process, you will be required to provide some details about the federal student loans you currently have, and also choose a federal loan repayment plan and services for your new federal consolidation loan. You will need to complete the application process for a federal student loan in just one session, so it would be for the best to do some research prior to starting the federal loan application process. Once you are ready to apply, you can follow these steps:

    • Consolidating federal student loans

      Consolidating federal student loans

      Visit studentloans.gov website and log in using your Federal Student Aid ID. By clicking the ‘Complete a Consolidation Loan Application Note’ under the consolidation and repayment tab, you will find the application. 

    • After that, you will need to select the federal loans that you would like to consolidate. You may choose to consolidate a specific loan or choose to consolidate all of them.
    • Then you will need to choose a student loan provider. Federal loan providers are private companies that manage federal loans for the Department of Education. You will be able to choose one of four providers for your brand new direct consolidation loan. You will also be able to state with the loan servicer that you have used for your previous federal loans.
    • Choose a repayment plan for your brand new federal consolidation loan. With a  standard federal loan consolidation repayment plan, depending on your overall federal student loan balance, you will be making equal payments each month for the next 10 to 30 years. You can also choose another repayment plan as you have an option of 6 more repayment plans to choose from, including 4 income-driven repayment plans.Before you start with your federal loan application process,  you can try the Federal Student Aid’s repayment estimator in order to choose the best repayment plan for yourself. By using this tool, you will get an idea of the amount of money that you are going to have to pay each month with the different repayment plans. If you have chosen an income-driven repayment plan, you will be required to provide some information regarding your income.
    • After you have chosen a repayment plan, complete and submit your federal consolidation loan application.

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