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| Manage Your Student Loans with Consolidation |
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By Brooke Heath
By now, you may have heard that consolidating your multiple student loans is a great way to manage your student loans, as well as save time and money. However, you still have questions and hat's why we're here. Read on to have all of your questions about student loan consolidation answered and to learn more about the benefits of consolidating!
Q: What exactly is consolidation? And what does it do to my existing student loans?
A: Consolidation is the merging of multiple loans into one loan. In the case of student loan consolidations, all the borrower's outstanding student loans are paid off by the consolidation company, after which, the accounts are closed. The total balance of the previous loans is transferred over into one, new, easy-to-manage loan.
Q: What are the benefits of consolidating my outstanding student loans?
A: There are numerous benefits to consolidating your student loans, the first being that you will save money. The amount of money that you can save depends on factors such as the amount of student loan debt that you will be consolidating; the interest rates that will be set on your consolidation loan, as well as the company whom you choose to consolidate with.
Some companies such as EdFed offer fixed interest rates on their federal student loan consolidations to save borrowers money over time. In addition, EdFed also offers interest rate reductions of up to 1.25% that can help to save borrowers thousands of dollars over the life of their loans. Seriously!
Another great thing about consolidation is that it saves you time by simplifying your life. When you consolidate, the days of making several different payments to several different lenders each month are gone! That is because with consolidation, there is only one monthly payment to only one lender! Consolidation eliminates the hassle involved with repaying your student loan debt!
Federal consolidations also have the benefits that come with federal student loans such as deferment and forbearance options, no credit checks, no cosigners and no prepayment penalties.
A lesser known fact about consolidation is that it can improve your credit score. This is because when you consolidate, all of your open loan accounts are paid in full, and then closed. The computers that run the credit checks see that all of your multiple accounts have been paid off and you only have one account left. This will help you with your financial status when you need to borrow money to make other large purchases, such as a home, car, etc.
Q: Who can consolidate? What are the eligibility requirements to consolidate?
A: Anyone who has taken out student loans may consolidate. This includes parents who have taken out PLUS loans to fund their child(ren)'s schooling. The most consolidation companies have the following eligibility requirements for borrowers who want to consolidate their student loans:
- Must be a current U.S. resident or eligible permanent resident
- Must have at least $7,500 in eligible student loan debt
- Must not have any loans in default
- Must be in the grace period or repayment period
- Must not have previously consolidated, or have additional loans to add to the consolidation
Q: Can I consolidate my private loans with my federal loans?
A: Very few lenders will allow borrowers to mix the two types of loans together. While it is possible, it is not to your advantage to do so. Mixing the two will forfeit your federal benefits such as the deferment and forbearance options, because putting the two together will basically turn your federal consolidation into a private one. Also, it is likely that the interest rate on the mixed consolidation will be higher than if consolidated separately. Look for a lender, like EdFed, who can offer benefits with both federal consolidations and private consolidations.
Q: Which loans can I include in my consolidation?
A: Borrowers may include the following student loans with a federal student loan consolidation:
- Federal Subsidized Stafford Loans
- Federal Unsubsidized Stafford Loans
- Federal Supplemental Loans for Students (SLS)
- All Federal Direct Student Loans (Direct Loans)
- National Direct Student Loans (NDSL)
- Federal Perkins Loans
- Federal Nursing Loans (NSL)
- Health Professions Student Loans
- Federal Parent Loan for Undergraduate Students (PLUS)
- Graduate PLUS Loans
- Federal Consolidation Loans
- Student Consolidation Loans
- Federally Insured Student Loans (FISL)
- Loan from the Department of Education
Q: What will the interest rate on my federal consolidation be?
A: There are several factors that are used to determine the interest rates on federal consolidations: the types of loans that you are consolidating, the company whom you are consolidating with and the status of your loans when you consolidate. The interest rate on most federal loan consolidations is calculated by the weighted averaging the interest rate on the loans being consolidated and then rounded up to the next one-eighth of one percent.
Q: When is the best time to consolidate my loans?
A: The best time to consolidate is while you are no longer in school and still in your grace period. By consolidating while you are still in your grace period, you will be able to lock-in a lower interest rate, than if you wait to consolidate when you enter your repayment period.
If you are unsure on the status of your loans, take advantage of the free student loan report that Student Loan Foundation has to offer by going to https://www.studentloanfoundation.org/slfrequestreport.php or clicking here. This free service provides borrowers with a full summary of their student loans, including the status, lenders, and balance.
Q: Can I consolidate while I am still in school?
A: At this time, federal regulations do not allow borrowers who are currently in school to consolidate their student loans. However, EdFed allows their borrowers who are currently in school to reserve their federal consolidations, allowing borrowers to consolidate once their schooling is complete.
Q: How do I choose a company to consolidate with?
A: Look for a company who will offer borrower benefits like interest rate reductions. EdFed offers its customers an immediate 0.25% interest rate reduction when their borrowers enroll in their automated debit program. They also offer an additional 1.00% interest rate reduction when their borrowers make 36, consecutive payments on time. This can save EdFed borrowers thousands of dollars When choosing a company, look for one with experience. It is important that the company whom you are entrusting your loans with handles your loans in a professional and accurate manner. Look for a company who has excellent customer service, who will walk you through the consolidation process. EdFed can offer its customers all of these benefits, as well as a simple application process.
Q: Where can I find more information on consolidation?
A: To find more information about consolidation and student loans, visit these websites:
EdFed
www.edfed.com
The U.S. Department of Education
studentaid.ed.gov/PORTALSWebApp/students/english/index.jsp
Students.gov, Student Gateway to the U.S. Government:
www.students.gov/STUGOVWebApp/Public
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