College Student Loan News and Info

Nearly any federal loan can be consolidated, but private loans cannot be consolidated using federal guidelines. However, private student loan consolidation can be obtained. Private lenders are competing for your business and may offer borrower incentives, such as cash back, reduced rates and principal reductions. 

To consolidate graduate student loans through a private lender, you will need to have proof of good credit or apply with a reputable co-borrower. Private student loan consolidation may require a minimum loan balance, but private lenders tend to be more flexible than federal loan programs.

You have four main ways to repay your private, consolidated graduate-student loans. The standard plan involves fixed monthly payments for up to 10 years. The extended plan allows borrowers to extend the length of a loan up to 30 years, but each lender’s repayment terms will vary, often depending upon the balances of your loans.

Meanwhile, graduated repayment is tailored for the borrower who will require lower payments for the first few years and can make higher payments afterward. If you choose a graduated repayment plan, you should be aware that time you take off from paying on the principal of the loan will likely increase the total amount of your loan.

Income sensitive/income contingent repayment plans are quite rare and are offered only to borrowers whose income will be small. Lenders base payments upon the monthly income and employment status of the borrower, the amount borrowed and other factors. Payments are adjusted annually as the income of the borrower changes.

Before seeking a private student loan consolidation, figure out how many loans you have and whether they are federal or private loans. You should also determine where you are in the repayment process, like whether you are in a grace period. If the loans are in default, you will be unable to consolidate them.

You should also consider your total number of lenders, and should take stock of the other monthly financial responsibilities you face. If using a private lender, you should be sure to consult one of your lenders for guidance before consolidation. Private loan consolidation allows borrowers to shop around for the best deal, while federal loan consolidation must adhere to government standards. 

Many benefits result from student loan consolidation, including the fact that consolidating student loans can stretch the repayment term and reduce monthly payments by as much as 51 percent. The repayment period could be extended to as long as 30 years, and consolidation can provide borrowers with low interest rates and give them the ability to make payments to a single lender.

However, before signing on any dotted line, borrowers should be aware of the drawbacks of consolidating student loans. As you extend your loan period length, you are adding to the total cost of the loan, since you are being charged interest for a longer period. If rates decrease, borrowers who have gone through the consolidation process cannot benefit from a break in interest rates because they are locked into a fixed rate. In addition, consolidation can cause borrowers to lose their benefits on unconsolidated loans.

This entry was posted on Wednesday, February 13th, 2008 at 12:16 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.