By Donna Allison on March 8, 2010
.jpg.aspx?width=75&height=75) You will have the flexibility of one lower payment each month if you consolidate your student loans. You may still want to consider consolidating, even if you can make the monthly payments from your original school loans. The advantage for you is lower payment amounts. Consolidating will free up money for bills with higher interest rates, such as personal loans and credit cards. Neither credit cards nor personal loans have the advantage of student loan tax-deductible interest.
By combining all of your student loans into one consolidated loan, you can lengthen the term of your repayment from the standard 10 years to up to 30 years, depending on the amount of your education debts. This frees up money for more immediate needs.
There are two types of student loan consolidation: federal and private.
If you want to consolidate federal student loans, you will combine any of the federal Stafford, Federal FFELP, Parent Plus, Perkins, and Federal Direct Loans that were taken out for your education. Federal student loan consolidation combines all of your existing federal student loans into one new loan with a fixed-rate refinancing program. There are no penalties for overpayment, so you can make larger payments when you are able, and shorten your repayment term.
Private loan consolidation is a separate program that allows you to refinance all non-federal, education-related debt (other than tuition). education-related expenses other than tuition, such as textbooks. But be aware that you will lose your federal loan benefits, if you consolidate your federal loans through a private loan.
When you consolidate, you will receive a consolidation application, information about your discounts, and details on how your interest rate will be computed. You'll need to provide your student loan information with your consolidation application.
Once your application is received, the “loan retrieval" process begins. Your lenders will be contacted to determine the exact amount you owe; and these debts will be summarized on a loan verification certificate. Once valid information is received from your lender(s), a check is sent to pay off your student loans. This action officially consolidates your loans. You will receive a new statement is sent, detailing your payment plan.
To reduce the amount of your student loan debt, consolidation may be the answer you are looking for!
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