Burdened With Debts? 5 Ways to Consolidate student loans
 |
| 5 Ways to Consolidate student loans |
Student loan consolidation is a very popular topic among recent college graduates; recent college graduates because that is when nearly all student loan debts starts calling for payment. If you are a student whose college education is being financed by a loan, you don’t have to dread your graduation day, like most other students do; one thing you need to do however is to know how to consolidate student loans.
One can’t say whether it’s a regrettable thing that many students leave college with a sizeable amount of debt. Already, the cost of paying for a quality college education that can help you start out life easily is on the high side. Most students leave college only to begin searching for ways to help manage their debt, and with student loan consolidation being a popular option, they often ransack the web and anything they lay their hands on, just to find ways to consolidate student loans.
- One thing that you need to understand is that student loan consolidation extends the repayment period of your student loans, and will ultimately help you to reduce your monthly student loan payments. However, you must understand that it may cause you to pay more over the lifetime of the loan, since you pay interest on the loan.
- Second on the list is to never consolidate your private student loans with your federal student loans. One can say that this is perhaps one of the most important student loan consolidation tips out there that there is. Consolidating your federal student loans into a private consolidation loan, only interprets to you forfeiting all the great benefits associated with your federal student loans.
- If you will take a private student loan, it will be very wise to ask the loan providers if the loan has a fixed interest rate or a variable interest rate. You may also want to ask if there are any pre-payment penalties associated with the consolidation loan when thinking of private student loan consolidation. In addition, you should still maximize your federal student loans before taking out private loans because they have competitive rates and more importantly, they offer protections for borrowers that private loans lack.
- Don’t ever pay an up-front fee for federal student loan consolidation; there is no up-front fee associated with federal student loan consolidation. Bear in mind that in some loan consolidation circumstances, fees will be deducted from the disbursement, but you should never have to pay an up-front fee. Also, in any case you receive a fee waiver or from your original student loan lender, you should check to see if you will have to repay that fee if you consolidate with another lender.
- For private loans, the best student loan consolidation company is usually subjective, since private student loans differ from one lender to another. In this case, all you should do is to research the pros and cons of private student loan consolidation for your specific situation.
- Before plunging into any student loan consolidating plan, make sure you compare the benefits provided by the current holder of your loans to those provided by the consolidation lender. It happens that most times, the loan discounts offered by the originating loan lenders are better than those offered by consolidating lenders. So as a student willing to be debt free, you will want to factor this into your decision when considering student loan consolidation.
Although consolidating student loans comes with good benefits, students should remember that while practically all repayment plans lower the monthly payments, they also add on several thousands in interest costs by stretching out the life of the loan. If, for example, you stretch out a standard 10-year student loan to 20 years, you will cut monthly payments by a certain reasonable percentage, but you will however end up paying double the amount of interest over that time.
Although, students who have already started repaying loans can opt for the income-based repayment plan, there is however something important that they should know; opting for the income-based repayment plan will restart the clock and give your loan a new term of 25 additional years.
As a final note for those seeking to consolidate student loans, a few important questions that you should ask your preferred consolidator are
- Whether it charges origination fees.
- what the maximum interest rate is
- If there are prepayment penalties
- What the life of the loan will be.
Make sure that you read the terms carefully, and if possible, have a friend, a fellow student, your co-signer or relative do the same. Ask your lender about anything that you don’t understand, and make sure you get a straight answer.
