Student Loan Consolodation

A Successful Student Loan Consolodation:

Student loan consolodation is the process of combining multiple educational loans into one loan.  This consolodation usually leads to lower monthly payments and an extended loan term. The extended term increases the amount of interest that is paid on a loan thereby increasing the amount that is paid for the original loan. For federal loans this increase in interest is typically minimal, for private loans the cost can increase significantly.

If you are lucky enough to have secured a federal student loan the process will be relatively simple. Your student loan consolodation for a federal loan has specific guidelines that the lender must follow. For instance, lenders are not allowed to charge any fees to consolidate your loan. They are also limited in the amount of interest they are allowed to charge. They use a formula that is based on the average of all the interest rates, rounded up slightly. This rate can not be more then 8.25 percent. Federal student loan consolidation interest rates are always fixed so that once you have squared away an affordable rate you never have to worry about it changing.

The process of consolidating federal student loans can be done online with a limited number of lenders. Some loans can currently only be consolidated by the federal governments lending arm.  It is important to look into consolodation as soon as you leave school, within the grace period for consolidating your loans.

As far as private student loan consolodation goes, it is more like applying for a traditional loan then a student loan. Private loan consolodation rates are based on your credit. Just like when you apply for a traditional loan better credit means a better interest and terms, so try to keep your credit in order while you are attending school. These loan consolodations are also subject to typical bank fees. Although it sounds like the costs are significant for consolidating private loans they can help you. By doing careful research you can leverage your lenders against one another to force the banks to compete for your business. By doing this in a thoughtful way you can get a good rate and terms.

The secret to successful student loan consolodation is diligence. Be aware of your timelines. Be aware of hidden costs and fees. Be aware of the fine print. If you do all of these things you will be able to consolodate in an affordable way.