When you consolidate, you not only tidy up your finances, but you also save lots of money in the future. When students consolidate, they can take advantage of a fixed interest rate and can extend repayment from 10 to 30 years, depending on loan size. In this regard, student loan consolidation is almost like refinancing a home.
When you visit or research various services specializing in loan consolidation for student loans, be sure to ask many questions. Ask if there are any credit checks involved. Usually, these services don’t require credit checks. Find an agency that honors this policy. Ask if there are any application fees. There are a lot of online services that charge nothing to apply.
So, why should you do it now? Well, there are many reasons. The big reason is to streamline your loan bill. When you consolidate, the service will pay off any balances in order to consolidate your various loans. You should also consolidate this instant if you graduated less than six months ago. These six months comprise a very important time known as the grace period. When you are in the grace period, the lenders won’t be knocking down your door to get their money back. Simply put, you are left alone for about six months. Act now before the onslaught begins!
Because the economy is in such uncertainty, this is the best time to consider student loan consolidation. According to schoolwork.org, these rates can be as miniscule as 3.5 percent — a very good deal.
Surprisingly, student loan consolidation is the act of getting another loan, often called a consolidation loan. If you want to consolidate, you need to have specific loans. Here are a few examples:
- Stafford loan — subsidized by the federal government. This is one of, if not the most, popular student loans out there. You usually get more money disbursed to you if you are an independent student versus a dependent student.
- PLUS loan — stands for Parent Loan for Undergraduate Studies. If your parent wants to help out with your college education, they can purchase this loan. The parent must have pristine or reasonably good credit.
- Perkins loan — another popular choice for students. This loan was originally titled the National Direct Student Loan. It is given on the basis of financial need. If you demonstrate enough need, you can borrow up to $3,000 per year.
Even though there is an enormous upside to consolidation, there are also a few cautions. When you do consolidate during your grace period, be prepared to begin paying off the loan immediately. The grace period essentially ends when you consolidate. Also, when you stretch out your payments, you will probably pay more interest charges during the length of the loan. When you agree to consolidate, know that you can only do so once. So even if interest rates drop even further after consolidation, you cannot take advantage of new, lower interest rates in the future.
So, what can we learn about student loan consolidation? Well, it’s a pretty tricky business, but if you are truly knee-deep in loan debt, consolidation may be a very viable option, regardless of the risks.
By Michelle Presbury