US Student Loan Consolidation

Free Government Debt Consolidation Loans

2009-11-04T21:17:00.001-08:00

Creditcard2.com debt solution services provide individualized financial counseling and education to help you eliminate your debt like, student debt, military debt, medical bills etc.

As many students already chase their learns and carriers, institute and college fees possess also increased. As a outcome, most students possess big reader loans via the moment they finalise their studies.

Government debt consolidation bids an choice which may dampen the weight of numerous loans with tall monthly payments.

How Does A Government Student Loan Consolidation Help You Reduce Debt?

A government student loan consolidation enables students towards consolidate excellent education loans into a single novel credit that lower your monthly fees since the terms of fee shall be extended. This provides the students many financial flexibility.

The monthly amortization for the government student loan consolidation shall also be lower since the repayment can be transmit at a longer period, which earns it convenient towards students and parents. The interest rate shall also be decimated since the borrower shall possess a lot of uses blueprint options. It is advisable towards consolidate your credit right as soon as graduation ahead of the grace period ends. This shall allow the borrower towards lock within the lowest interest rate possible onto the loans.

Besides, achieving licenses within certain fields is impossible when you failed towards wage off your reader credit debts. With everybody these impacts, it is otherwise noticeable that preventing a reader credit is none distance towards activate a life as soon as college. If you do arrive back and rob out increasingly reader loans, you shall be able towards consolidate again as soon as graduation.

When Is The Right Time towards Consolidate Your Student Loans?

In the government debt consolidation loan program, it is interesting towards know that there are actually none deadlines related towards it. It is based via the fact that you can apply for the student loan anytime during the grace period or even onto the repayment period. But towards consolidate student loans, a number of considerations ought be paid attention.

To consolidate student loans, you should know that it normally occur during your grace period. At this moment, the lower in-school interest rate shall otherwise be applied towards evaluate the weighted medium fixed rate towards consolidate student loans. And once the grace period has ended onto your government reader loans, the upper in-repayment interest rate shall be applied towards evaluate the weighted medium fixed rate. Given such procedure, it is otherwise understandable that your fixed interest rate for government student loan consolidation shall be upper whether you consolidate reader loans as soon as your grace period.

And when you are interested towards consolidate reader loans, you should know that even whether your reader loans are already within repayment, towards consolidate reader loans is still licenced and beneficial. It is for the reason that when you consolidate reader loans at this moment, you already fix the interest rate onto your government student loans whilst the rates are still originally low.

Student credit consolidation can assistance most borrowers within a lot ways. However, it is still necessary towards note that rates won’t actually stay low without end. It is greatest towards do your innovation already whilst rates are still low.

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Source: EzineArticles.com/?expert=Dean_Shainin

Types of Repayment Options

2009-11-03T23:33:00.000-08:00

In an effort to give student borrowers more flexibility in how they repay their loans, there are four types of payment plans to choose from. In all cases, it’s a good idea to shop around and compare the different repayment plans from lending institutions because terms vary from one lender to the next, and you might be able to get a better deal from another lender.

The first is the Standard plan, and it’s pretty straightforward: fixed monthly payments for up to 10 years. Second is the Extended plan. This plan allows you to extend the length of loan up to 30 years. However, each lender may have different repayment terms, which largely depend on the balances of your loans. For example, if your loan balance was less than $12,000,a lender may allow you up to 12 years to repay your consolidated loan. If your loan balance was more than $60,000, then your lender would probably give you up to 30 years to pay that back. An important note: other education loans that aren’t being included in your consolidation loan may count toward the “loan balance” calculation that determines the length of repayment for which you qualify.

The third option is Graduated Repayment. This plan is bestsuited for someone who needs lower payments during the first couple of years and then will be able to handle higher payments during the remaining years. Again, different lenders offer plans that mix-and-match levels of payments, for example, interest-only payments for the first couple of years, followed by higher payments that pay both the interest and principal. However, any time you take off from paying on the principal of the loan will probably increase the loan’s total amount.

A fourth option is Income Sensitive / Income Contingent. In some situations, lenders will base your payments on your monthly income, amount you borrowed, your employment status, and other factors.
Your payment will adjust annually as your work situation changes. Requirements and terms will vary with each lender. It’s relatively hard to qualify for this plan, but if your income is going to be very low, you might want to check out this option. As with the Graduated Repayment plan, this plan will probably increase the total cost of the loan (principal + all interest).

SOURCE: www.simpletuition.com

When to CONSOLIDATE

2009-10-27T23:28:00.000-07:00

The answer to that question is primarily based on where you are in your life—whether you’re still in school or have become an alumnus. If you’re in “repayment” mode, meaning you’re all done with full-time
school and the student loan bills are starting to come, then you can consolidate now. If you’re in a “grace period” (the time right after you graduate but before you have to pay your student loan bills), you can
consolidate. If you’re still enrolled in the program for which you borrowed, you can’t consolidate.

No matter your loan status, however, there is one date on the calendar that you should be aware of: July 1. On that day each year, interest rates for all but the newest federal student loans are reset. Keep an eye out for information about what the new rate will be.

Indications are that it will increase slightly in 2007, so consolidating prior to July 1 will ensure that you consolidate at the rate in place before the change. So long as your application for federal consolidation is complete and submitted before the deadline, you’re good to go. Note however, that in general, it takes between 30 days to 90 days to complete the loan consolidation process. Once your loan is consolidated, your first payment will be due in 60 days.

SOURCE: consolidationcomparison.com

Student Loan Glossary

2009-10-20T23:23:00.000-07:00

Here are some glossary terms you should know:

In-School—When you’re still in college as a full-time student.

Grace—The time after graduation when you are not required to
start repaying your loan. For Stafford Loans, this is six months;
for Perkins loans, it’s nine months.

(There’s no grace period on a PLUS loan.)

Repayment—Following the grace period, this is when you
begin repaying your student loans.

Delinquency—When you fail to make a payment when it’s due.

Deferment—When your lender allows you to temporarily
postpone your payments due to economic hardship.

Forbearance—When your lender allows you to temporarily
postpone paying the principal on your loan, though interest on
the loan still accrues.

Default—When you fail to make your payments or abide by the
terms of your loan. Defaulted loans are reported to credit-reporting
agencies, which is really bad for your future credit scores.

Federal Consolidation VS Private Consolidation

2009-10-13T23:17:00.000-07:00

Federal consolidation loans are a mechanism to refinance federal education loans only. Private consolidation loans are a way to refinance private education loans only. The main difference is that a federal consolidation loan comes with a fixed interest rate that follows a set federal formula, while private consolidation loans come with a market rate that may be fixed or variable.

If you consolidate both federal and private loans you should make sure to keep them separate – refinancing a federal loan with a private consolidation product will most likely result in a much higher interest charge than you’d pay if you kept it separate. Private consolidation loans might be an attractive option for you.

Here are some of the benefits you might find:

Longer repayment term (up to 30 years in some cases)
Lower monthly payment
One monthly bill

Potential release of cosigner from the original private loans but weigh this decision carefully, as a longer repayment term usually means a greater cost of borrowing (you pay interest for more years). Also, make sure to consider the interest rate on the private consolidation loan versus your existing private loans – rate structures can vary widely.

SOURCE: consolidationcomparison.com

STUDENT LOAN CONSOLIDATION: Borrower Benefits

2009-10-06T23:06:00.000-07:00

Many lenders offer incentives to encourage borrowers to choose their loan product. These incentives are commonly referred to as“Borrower Benefits,” and they come in several forms.Automatic Some Borrower Benefits are “automatic,” meaning that you automatically receive the incentive or benefit without
having to qualify.

Earned Some Borrower Benefits are “earned,” meaning that you must qualify for them first. A common earned Borrower Benefit is an interest rate reduction for setting up automatic payments; another is an interest rate reduction for a pre-determined number of on-time payments. Note that “earned” benefits can
sometimes be “un-earned” if you stop meeting the requirements.

Ask your selected lender for details about borrower benefits, including requirements to qualify and/or to later be disqualified or them.

Examples of Borrower Benefits can include:

Interest Rate Reduction: Usually a percentage by which the interest rate on the consolidation loan will decrease after a certain number of months of ontime payments.

Principal Reduction: Usually a percentage of the original principal balance of the loan that is deducted from the amount owed–earned after a certain number of months of ontime payment.

SOURCE: consolidationcomparison.com

List of Federal Repayment Options

2009-09-29T22:52:00.000-07:00

Here is a list of Federal Repayment Options available:

1. Standard payment: Standard payment is the payment schedule every borrower is automatically assigned. (FFEL borrowers have 45 days to switch from this plan after being notified by their lenders to choose a repayment plan.) Standard plans have the highest monthly payments because the terms are between five and ten years, which means you may pay less on your loan overall. Note that your monthly amount due may fluctuate if you have a variable interest rate.

2. Extended payment: If you have total outstanding student loans that exceed $30,000, you may repay your debt on a fixed or graduated payment schedule for up to 25 years (most repayment plans are within the 10 year range). Because you're extending the term of the loan, your monthly payments will be quite a bit lower, but you will pay more in interest over the life of the loan.

3. Graduated payment: Graduated payment is exactly what it sounds like, with payments starting out low and gradually increasing during the repayment period. Graduated plans are helpful for borrowers who are just beginning their careers and are more likely to have higher incomes over time.

4. Income Contingent Repayment: This type of repayment plan is another one that is essentially what it sounds like. Available only to Direct loan holders, payments are calculated according to income and your total amount of debt. The loan term is up to 25 years and is regularly adjusted according to any changes in income. Payments increase as income increases, but your required payment can be no greater than 20% of any earnings above the poverty level. When the 25 year term is over, if there is a balance remaining, it will be discharged.

5. Income Sensitive Repayment: Under an income sensitive repayment plan, borrowers with FFELP loans are allowed to make payments calculated according to gross monthly income. The loan term is 10 years long.

6. Income Based Repayment: Income based repayment is a more generous option than the two prior income-based repayment plans, but will not go into effect until July 1, 2009. Unlike income-contingent repayment and income-sensitive repayment, it is available in both the Direct Loan and FFELP programs. The payments operate much like the above income based repayment plans, but the payments are calculated based on a lower percentage of your income.

7. Perkins loan payment: Perkins loans function differently than other federal loans. The government establishes a consistent minimum payment per month, which is currently $30 for an NDSL loan or a Perkins Loan made before October 1, 1992 and $40 after that date.

SOURCE: www.mahalo.com

Student Loan Repayment Plan

2009-09-22T22:43:00.000-07:00

What's income-based repayment?

It's the newest of six repayment options for federal student loans. It differs from most options in that the other loan payment plans are designed to repay the balance over a set period of time, such as 10 years. Income-based repayment doesn't base payments on a set payoff date. Instead, the payments are based on the borrower's discretionary income. That's calculated by determining how much the borrower's income exceeds federal poverty guidelines for his or her family size and location. The less you earn, the less you pay.

If you pay less each month, doesn't that mean you'll pay for more years and end up paying more interest, too?

Yes. Interest accrues on student loan balances each month and if you're paying less than the interest that's accruing, the balance of your loan could actually rise. For that reason, anyone who could afford to pay more would be advised to, Irons said. But if the loan payments are making it impossible to pay other bills, this gives you the flexibility to help your cash flow without hurting your credit.

Does that mean I'll be paying on my student loans forever?

No. This plan says that any borrower who has faithfully made payments for 25 years can have his or her remaining loan balance forgiven or wiped away at the end of that time.

In addition, if you work for government or a nonprofit and repay your debts under the direct loan program for 10 years, you could have your loan balance wiped out faster under another federal program called Public Service Debt Forgiveness.

How much would I have to pay each month?

That depends on your income, your debt and the number of people in your household. However, the Education Department says if you are single and earning $20,000 annually, the most you'd have to pay against student loans is $47 a month. If you earned $25,000, the required payment would be $109. If you earned $35,000, the required payment would be capped at $234.

Comparatively, if you had $50,000 in student debt at a 6.8% interest rate, you'd have to pay $575.40 a month under the standard repayment plan, no matter how much you earned.

Am I going to be locked out of the program if I earn more?

No. The formula determining whether you qualify looks at your loan payments versus your discretionary income. You could have a substantial income and still qualify if you also have a lot of debt. Borrower's payments are adjusted once annually to reflect changes in income and family size.

Can I do this with all my loans?

The program is only available for federal student loans under the Stafford, Grad Plus and federal consolidation loan programs. It does not apply to parent's loans for students (called Plus Loans), and only applies to Perkins Loans if they're consolidated into the Federal Family Education Loan or Direct Loan programs. It also does not apply to private loans, state loans and loans that are not backed by the federal government.

How do I figure out if I qualify and how much my payments might be?

The Project on Student Debt has set up a website dedicated to answering questions about income-based repayment at www.ibrinfo.org. The site has a calculator that estimates whether you'll qualify for the program and roughly what your payment amount will be.

The Education Department also offers a Web-based calculator on its site that explains all the repayment options for student borrowers. That site is at www.studentaid.ed.gov. (Scroll down and look for "repaying your loans" on the left side of the page. After you click on that, you'll see "repayment plans and calculators." Click again and it will link to repayment calculators for the various options, including standard and extended repayment.)

How do I apply?

Gather your loan information, showing balances, type of loans and lenders. Then contact your lenders. If your lender will not offer income-based repayment, call the Education Department at 1-800-4-FED-AID and look into consolidating your qualifying loans into the Direct Loan program, which is administered by the federal government.

Article written by Kathy M. Kristof

To read full article, click SOURCE

Benefits of STUDENT LOAN CONSOLIDATION

2009-09-15T22:38:00.000-07:00

If you haven’t noticed it, education costs don’t come cheap nowadays. Many students are taking loans to support their way through college. It seems to settle their problem for the time being but things will start to get difficult when they graduate. They are already in debt before they even earn their first dollar. The tips below are to show you why you should consider the student loan consolidation.

1. Lower payment

This is by far the best reason for you to consider taking the loan consolidation. It is possible to reduce your monthly payment by 40% - 50% when you make a research on the lenders. Imagine freeing half of the financial load being lifted off your shoulders. You will feel that the air is lighter and your life is not just about paying for loans.

2. Lower rates
Besides lowering your payment, you can also lower your interest rates by looking for the right lenders. Again, it will prove beneficial to you when you run some researches on the various lenders’ offers.
And be careful for the fine prints and remember to ask for any hidden cost. You don’t want to suffer any extra payment when you are trying to manage your loan. And to help you on that, you can look for online consolidators to calculate your future student consolidation loan base on the current rate of your student loan.

3. Only one payment
Let’s say you have acquired a housing loan and other possible loans during your studies. And imagine you have to bank in different payments to different companies at different time. Isn’t that a lot of works to do? Wouldn’t it be great that you can make one payment and be free from all the annoying reminders? You can do that when you consolidate the student loan and get your loans taken care of.

4. Relieve stress
Please know that the financial companies will punish you for paying late and surely you don’t want that. It is a stressful job to remember the various due dates for the payments. What if you have more important tasks to attend to?

It is very possible that you will forget to pay the loan. And when you sign up for student loan consolidation, you only pay once to the company to cover all your loans. This frees your mind so that you can focus on your job or something more rewarding.

SOURCE: Article written by: Michael W

Lowest Federal Student Loan Rates Ever

2009-09-08T22:31:00.000-07:00

GOOD NEWS!!!

SOURCE: www.herald-citizen.com

PUTNAM COUNTY -- Those of you who have Stafford and Plus loans, there's some good news that's just been released -- they are at their lowest rates since the federal student loan program was put in place.

Loans issued after July 1, 1998 through June 30, 2006 can now be consolidated and changed to one loan with a fixed rate.

"Stafford loans in repayment status is now at a fixed rate of 2.48 percent, down from 4.21 percent last year," Landon Vick of Cravens and Company wealth management said. "The in-school grace period or deferment status loan's new rate is 1.88 percent, down from 3.61 percent last year. The new rate for the Plus loan is 3.28 percent, down from 5.01 percent."

These new rates only apply to Stafford and Plus loans.

For more information about consolidation and what it means for student loans, visit www.loanconsolidation.ed.gov.

SOURCE: www.herald-citizen.com

Secret of Finding Student Loan

2009-09-08T07:18:00.000-07:00

The credit crunch and debacle on Wall Street have wiped out those easy-peasy $40,000 college loans that used to be all over late-night TV. And the feds are considering a dramatic consolidation of the educational lending industry that could reduce options still further. But no matter what happens in Washington or on Wall Street this year or next, most students will still be able to borrow enough to cover the bulk of tuition at their local public university at a reasonable cost from the feds.

One of the most surprising results of the turmoil in the lending markets is how students' loan options have diverged from parents'. Here are the key things both should bear in mind:

DEALS FOR STUDENTS. Students should always start with the feds. The first step: filling out the FAFSA form, the Free Application for Federal Student Aid.

All full-time students who complete a FAFSA and a federal loan agreement provided by their school's financial aid office can borrow at least $5,500 a year through the Stafford student loan program. Students who are at least 24 or whose parents have bad credit can get Stafford loans of up to $9,500 to $12,500, depending on their year. This fall, Staffords will charge no more than 6.8 percent a year in interest plus a 1.5 percent upfront fee, for an average annual percentage rate of 7.1 percent.

Low-income students generally qualify for better deals. Some will receive federal Perkins loans, which charge no interest while students are in school and just 5 percent after they leave. And most needy students will receive "subsidized" Stafford loans, which for the academic year starting this September will charge no interest while students are in school and 5.6 percent after they leave.

Need more? Uh-oh! Dropping out of college is usually far more expensive, in the long run, than sticking it out and graduating to qualify for better jobs, so it can pay to borrow a little extra to make it to commencement. The problem is that students who need more than the government will lend have few good choices, says Greg McBride, a senior financial analyst for Bankrate.com. Here are some possibilities:

Charities and colleges. A few charities, such as Maryland's Central Scholarship Bureau and the Scholarship Foundation of St. Louis, award interest-free loans to a handful of needy students each year. And some colleges, including the University of Minnesota-Twin Cities, are trying to un-crunch credit by making loans themselves. But beware: Lauren Asher, acting president of the Institute for College Access and Success, warns that while many of these are good deals, students shouldn't automatically accept every loan they are offered.

Alternative loans. Banks and other lenders have gotten so picky recently that they've been making only private (or "signature") education loans, often at high variable rates, and only to U.S. citizens with good credit scores (typically those with FICO scores of at least 700). That means most students need at least one employed cosigner to promise to repay their private loans. It also means private loan costs will rise when interest rates bounce back up. But borrowers who can convince lenders that they are responsible and capable of repaying, such as Sarah Kelly of New York City, have been able to find cheap alternative loans. After suffering with $50,000 in private law school loans charging 7 percent a year, the recent New York Law School graduate and her parents agreed to try out a Student Payback contract offered by Virgin Money. Her parents paid off her expensive private loans. In return, Virgin Money withdraws a monthly payment from Sarah's checking account to pay back her parents at a lower rate.

OPTIONS FOR PARENTS. Parents, unfortunately, have to do more legwork, as Gary Krist of Bethesda, Md., the father of a rising Northwestern University freshman, discovered. He was shocked this spring when he saw how several colleges had packaged expensive parent loans into his daughter's financial aid offers. But at least it was motivating: Over the next month or so, he and his wife spent about 20 hours calling up alternative lenders and scouring the Web for better deals.

Federal loans are no bargain. While students can borrow comparatively small amounts of money cheaply from the feds, parents are offered bigger but more expensive loans. The federally backed parent PLUS loan can cover the student's entire cost of college (less any other financial aid). But PLUS loans can cost as much as 8.5 percent a year plus a fee of 4 percent of the loan amount, for a total annual percentage rate as high as 9.4 percent. Shoppers can find discounts, however. Those who borrow directly from the federal government and make automatic electronic payments are charged just 7.65 percent in interest. (After fees, the APR totals 8.55 percent.) And the eligibility criteria are comparatively forgiving, even for parents who are a little behind on their mortgages.

Click here to continue reading this article from Kim Clark for USNews.com : The Secret of Finding Student Loan

STUDENT LOAN CONSOLIDATION: Lower Costs and Better Repayment Options

2009-09-01T22:24:00.000-07:00

SOURCE: www.online.wsj.com

NEW YORK (Dow Jones)--This could be the right time to consolidate student loans.

A number of programs and interest rates change after July 1, offering a chance to lower costs and get better repayment options. That's good news for students, who are graduating with on average about $23,000 in debt, and of course for parents still supporting them.

Similar to refinancing, consolidating of student's federal loans can be done for no fee. It's also a good opportunity for advisers to discuss college costs with families. The financial crisis and tighter credit have left even high networth investors less confident about college savings.

If someone consolidates during the grace period - which is typically six months after graduation - the Stafford loan rate could drop to 1.88% from 3.61%. Someone already repaying loans could see the rate drop to 2.4% from 4.21%. The PLUS loans rate could drop from 5.01% to 3.28%, says Mark Kantrowitz, publisher of FinAid, a Website that tracks the college financial aid industry. Consolidation, he says, locks in the lower rates beyond the coming year.

"These rates are historically low rates, and we are unlikely to ever see rates this low again," he says.

Until July 2006, interest rates on federal students were at variable rates that could potentially climb to 8.25% for Stafford Loans and 9% for Plus Loans. The consolidated interest rate is a weighted average of the interest rates on the loans at the time of consolidation, rounded up to the nearest one-eighth of a percentage point. It cannot exceed 8.25%.

After 2006, the rates became fixed. The unsubsidized Stafford loans are now 6.8%. The subsidized Stafford loan is decreasing each year from 6.8% to 3.4%. (It is scheduled to return to the 6.8% rate if Congress does not act). The Plus Loans are now fixed rates at 8.5% for FFEL PLUS Loans or 7.9% for Direct PLUS Loans.

Another benefit to consolidation is that it is a requirement for some deferred repayment plans. Borrowers typically have from 10 to 25 years to repay loans, depending on the repayment plans they choose.

Extending payments may ease monthly expenses in the short term, but it could add significantly to the cost of the loan.

For example, repaying $230 a month at the Stafford rate of 6.8% will add $7,619 in interest to a $20,000 loan repaid over 10 years, says Kantrowitz. In contrast, extending that to 20 years with payments of $153 a month would add $16,640 to the $20,000 loan for $36,640.

Another option for grads after July 1, is a new income-based repayment plan. The program doesn't require consolidation, but it caps monthly payments at a certain percentage of the borrower's income.

"It's actually a very good plan for people experiencing financial difficulties," says Kantrowitz. "It's better for you than a forbearance."

Only a few companies still consolidate private loans. That's worth considering if the borrower's credit score has significantly improved - say more than 100 points - and may enable them to get a better interest rate.

Another potential benefit to consolidating a private loan is that it could enable someone to remove a co-signer such as a parent or relative from potential liability. This typically requires regular payments of 24 to 48 months.

SOURCE: www.online.wsj.com

Changes to Student-Loan Terms - CONSOLIDATION LOANS

2009-08-25T20:53:00.000-07:00

Recent Changes to Student-Loan Terms

Federal legislation has made several changes in federal student-loan programs terms. The following are highlights of the major changes.

Consolidation Loans

Loan consolidation permits federal student-loan borrowers to bundle multiple student loans into a single loan, and depending on the borrower’s total education debt, extend the period for paying back the loan.

In-school consolidation. You no longer may consolidate your student loans while you still are attending school at least half time. The law eliminated a provision that had permitted you to request that your loans enter repayment early. You now will have to wait until you are in the grace period after you leave school (or drop below half-time enrollment) or in repayment on your loans before you may consolidate them.

Spousal consolidation. Spouses no longer may include their loans in a single consolidation loan.

Reconsolidation. With a few exceptions, if you already have consolidated your loans, you may not obtain a subsequent consolidation loan. The exceptions are that you subsequently take out a loan eligible to include in a consolidation loan, that you decide to include additional eligible loans within 180 days after receiving your consolidation loan, or that you decide to add eligible loans that you did not include in the original consolidation loan. The law added another exception that permits borrowers with Federal Consolidation loans to obtain a Direct Consolidation loan for the purpose of obtaining income-contingent repayment, but only if the lender has requested assistance from the loans' guarantor to help the borrower avoid default.

STUDENT LOAN CONSOLIDATION Calculator

2009-08-18T20:48:00.000-07:00

FinAid's Loan Consolidation Calculator can help you understand the tradeoffs of consolidating your loans. It compares the reduction in the monthly loan payment with the increase in the total interest paid over the lifetime of the loan. It also shows you the interest rate on your consolidation loan.

Despite the switch to fixed interest rates on Stafford and PLUS loans eliminating a key financial incentive to consolidate, there are still several reasons to consolidate your education loans. These include having a single monthly payment, access to alternate repayment plans, the PLUS loan interest rate loophole, and the ability to reset the 3-year clock on deferments and forbearances. But consolidation can cut short the grace period, although the grace period loophole can work around this problem. It is best to avoid consolidating Perkins loans, because you lose several valuable benefits. Beware of extending the term of your loan, as this can increase the total interest paid over the lifetime of the loan; you can stick with standard ten-year repayment.

Before consolidating, always evaluate the benefits provided by the current holder of your loans. The loan discounts offered by originating lenders tend to be superior to those offered by consolidating lenders, since consolidation loans have tighter margins. Also, if you received a fee waiver or rebate from the originating lender, you may have to repay that discount if you consolidate with another lender. It may be possible to get some of the benefits of alternate repayment plans without consolidating, such as extended/graduated repayment with a loan term of up to 25 years and a single monthly payment, if you have more than $30,000 in federal education loan debt accumulated since October 7, 1998 with the lender. (This is due to a little known provision of the Higher Education Act, in section 428(b)(9)(A)(iv), and the regulations at 34 CFR 682.209(a)(6)(ix).)

You can change the repayment schedule on your loan once per year. So consider starting off with standard ten-year repayment on your consolidation loan. You are not required to start off with extended repayment. If you find it difficult to afford the payments, you can always switch to extended repayment later.

SOURCE: www.finaid.org

Interest Rate on Consolidation Loan

2009-08-11T20:39:00.000-07:00

The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.

For example, suppose a student has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.

If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 6.8%), the weighted average is


    $5,000 * 5.0% + $10,000 * 6.8%
    ------------------------------ = 6.2%
    $5,000 + $10,000

This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%.

Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%.

If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between.

Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.

(For the mathematically inclined, there is a slight difference due to the different shapes of amortization curves at each interest rate. In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. So using a weighted average yields a very small reduction in the monthly payment (in this case, 7 cents) and in the total interest paid ($8.68) due to a kind of triangle law. Of course, when you consolidate the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, yielding a slight increase. So you pay a tiny bit of a premium for consolidation, due to the rounding up of the interest rate.

The PLUS loan interest rate loophole can reduce the interest rate on 8.5% fixed rate PLUS loans by 0.25% through consolidation.

If you were deferring the interest on an unsubsidized Stafford Loan by capitalizing it, most lenders will add the capitalized interest to principal when you consolidate. (Lenders can capitalize interest at most quarterly, but most capitalize it once when the loans enter repayment or at other loan status changes.)

SOURCE: www.finaid.org

List of Loans Eligible for Consolidation

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Here is a quick list of the loans that can be and cannot be consolidated.

Student Loans from the following programs are eligible for Consolidation Process:

Federal Family Education Loan Program(FFELP): Federal Stafford Loan, Federal PLUS Loan, SLS (Suplemental Loan for Students) and consolidation loans thereof.
Federal Direct Loan Program(FDLP): Stafford, PLUS and consolidation loans thereof.
Federal Perkins Loan.
Federally Insurance Student Loan (FISL).
Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students.
Nursing Loan Program (NSL).

Health Education Assistance Loans (HEAL).

Student Loans not eligible for Consolidation:

Non-federal loans obtained through banks, universities or other private financial institutions.

SOURCE: www.student.net

Advantages of STUDENT LOAN CONSOLIDATION

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Education was regarded as an indispensable tool for subsistence, and here in the ever so demanding society it has been far too costly for the majority. Contrary to its known feasible essence of being incalculable in terms of expense, the truth seeps in to each student that in order for them to finish college they should be able to obtain of the predominant solution by resorting to student loans.

On account of the reality that college tuition in first-rate or second class universities and colleges are unimaginably pricy, it would necessitate students and their families to agree in engaging to numerous student loans. Conventionally, the burden of the payment has always been a problem especially for the not-so-well-off families. To settle this burden there arise offers for student loan consolidation. Perhaps for some, there’s ambiguity regarding its benefits, but certainly there are several advantageous reasons for engaging in such.

Low fixed interest rates

Normally interest rates are rising at incomparable costs depending on the prime rate. As a result the loans that one has availed from different loan programs are also accumulating high interest rates. Yet, when one settles for consolidation, his rates would become fixed because they would use a formula in determining the weighted average of every interest rate of remaining loans. Having low fixed interest is just an icing to the whole cake because this would last for whole duration of the loan. This would mean more savings on the part of the debtor.

Once a month payment

When a student settles to enter college he would start by borrowing from many student loan companies to be able to finance his college tuition. With that being said definitely there are piles of bills that one has to take care of each month. The combination of one’s loans into a program would lead to the trimming down of his responsibilities to a single burden under an account. For that reason the debtor then could loosen up and attend to his other liabilities or loans.

Money saving incentives

A lot of student loan companies give out a lot of promises to be able to compete with other consolidating agencies and to draw potential clients. For example, when one is able to pay on time he could take advantage of having lower interest rate or of distinguished services intended for customer’s accessibility such as online inquiries. In addition, consolidating fees won’t be required from the debtor, apart from not having any early payment or repayment fees or penalties to worry.

Repayment option grants

Just to make room for the debtors to repay for their student loans there are several guidelines set subject to the amount of loan. For instance, loans lower than $ 7,500 has a repayment term of 10 years. If in case the student owes more than $ 7,500 but less than $10,000 the term for repaying it would be 12 years. But if the loan is between $ 10,000 and $ 20,000 he could pay for it in an average of 15 years. Any loan higher than the aforementioned range would acquire the repayment term of 20 to 30 years.

Enhance credit rating

If one has not yet consolidated his student loans, the tendency is to have several credits in different loan firms, possibly jeopardizing his credit score. In settling for student loan consolidation, his credit rating is increased due to the closure of other credit lines. Having good credit standing can help his future plans of obtaining other private loans such as car loans or mortgages.

Obviously these aren’t the only advantages that student loan consolidation has to offer. The discretion rests on the debtor himself. The same is true with the need for a person’s practical judgment to manage his finances especially in these days of excessively expensive way of living. One must consider that in previous times, education was believed to be ‘priceless’. But due to the rising cost of education, apparently it has been very demanding at this point in time.

SOURCE: www.exforsys.com

Disadvantages of STUDENT LOAN CONSOLIDATION

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Student loan is considered by some to be the solution in getting a college education. But what isn’t generally known is that there are disadvantages involved in getting a student loan consolidation when you need to repay your debts in the future.

Students should be aware of what they are getting themselves into when they avail of a loan that they would have to repay later on with interest when they start working.

Most of the time, students would have to get a loan in order to sustain their education and standard of living. Some loans that students mostly incur include credit card debts and government loans. In the end, some students feel that they have no choice but to avail of student loan consolidation because they feel that it would significantly help them in getting their finances in order but they are unaware of the disadvantages that awaits them. This is because while the advantages of loan consolidation are highlighted, the disadvantages are often downplayed.

Student loan consolidation undeniably has its advantages, but on a deeper look, you may get end up losing more money than you originally thought. One of the first top disadvantages of student loan consolidation is because while you usually have to pay for a lower interest rate by availing of a student loan consolidation, these interest savings may be eaten up because your discharge benefits may be lost. Another second disadvantage is that many people are not aware of is that you can also lose your borrower’s benefits that you currently enjoy from your current loans that are not consolidated. Some borrower’s benefits include interest rate discounts and rebates. The said benefits could already compensate for the lower interest rates that student loan consolidations usually advertise so you have to rethink your options when repaying your debts.

Another disadvantage in a few cases is that paying through student loan consolidation may end up even becoming more expensive to pay than just paying for your loans the ordinary way. This happens when you have several unconsolidated loans and you cannot pay both loans that you have availed of. Student loan consolidation may end up driving up your interest expense when you had chosen to pay the unconsolidated loans first. So you should prioritize which loan you would have to pay first.

You should also consider your personality when you need to apply for a loan. If you have a lot of outstanding debts that range from credit card loans, mortgages, and even health insurance loans, then availing of a student loan consolidation is not for you because you may not be able to cope with the commitment that is necessary to eliminate your loans altogether through loans consolidation. But if you decide to go for it nevertheless, then here are some considerations you must keep in mind to help you choose the best deal possible. Find out the amount of money that can be lent and check also whether that loan can be consolidated with other debts you incurred or are anticipating to have in the future.

Several loan consolidation programs also enable you to choose between fixed and varied interest rates. Some have penalties for paying a pre-payment; you should not choose this kind of program. In addition, research on the penalties that the program has in case you default on the
payment because you may never know whether you will get unemployed or lack the necessary income in the future.

Also, some student loan consolidation makes it necessary for you to get other loans in order to get into their program so know the student loan consolidation program you are getting into thoroughly before availing.

The last disadvantage of getting a student loan consolidation is the fact that you cannot predict the prevailing interest rates in the future so you may actually end up paying more for the repayment if the interest rate in the future is lowered. On the other hand, the reverse is also true, you can benefit if the prevailing interest rate is higher than the interest you are paying for your student loan consolidation. Overall, you really have to weight the advantages and disadvantages of student loan consolidation carefully based on your personal background, your overall lifestyle, and your needs.

SOURCE: www.exforsys.com

Eligibility for DIRECT CONSOLIDATION LOANS

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To qualify for Direct Consolidation Loans, borrowers must have at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace, repayment, deferment, or default status. Loans that are in an in-school status cannot be included in a Direct Consolidation Loan.

Borrowers can consolidate most defaulted education loans, if they make satisfactory repayment arrangements with their current loan holder(s) or agree to repay their new Direct Consolidation Loan under the Income Contingent Repayment Plan.

Borrowers who do not have Direct Loans may be eligible for a Direct Consolidation Loan if they include at least one FFEL Loan and have been unable to obtain a Federal Consolidation Loan with a FFEL consolidation lender or have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to them or intend to apply for loan forgiveness under the Public Service Loan Forgiveness Program.

Borrowers who have only a Direct Consolidation Loan cannot consolidate again unless they include an additional loan.

NOTE: The Direct Loan Servicing Center has information on the Public Service Loan Forgiveness Program.

SOURCE: loanconsolidation.ed.gov

Benefits of DIRECT STUDENT LOAN CONSOLIDATION

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Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages.

One Lender and One Monthly Payment
With only one lender and one monthly bill, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.

Flexible Repayment Options
Borrowers can choose from four different plans to repay their Direct Consolidation Loan, including an Income Contingent Repayment Plan. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a Direct Consolidation Loan, borrowers can switch repayment plans at anytime.

No Minimum or Maximum Loan Amounts or Fees
There is no minimum amount required to qualify for a Direct Consolidation Loan! In addition, consolidation is free.

Varied Deferment Options
Borrowers with Direct Consolidation Loans may qualify for renewed deferment benefits. If borrowers have exhausted the deferment options on their current Federal education loans, a Direct Consolidation Loan may renew many of those deferment options. In addition, borrowers may be eligible for additional deferment options if they have an outstanding balance on a FFEL Program loan made before July 1, 1993, when they obtain their first Direct Loan.

Reduced Monthly Payments
A Direct Consolidation Loan may ease the strain on a borrower's budget by lowering the borrower's overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on a borrower's Federal education loans.

Retention of Subsidy Benefits
There are two (2) possible portions to a Direct Consolidation Loan: Subsidized and Unsubsidized. Borrowers retain their subsidy benefits on loans that are consolidated into the subsidized portion of a Direct Consolidation Loan.

SOURCE: loanconsolidation.ed.gov

Top US Consolidation Loan Lenders FY 2006

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Listed below are the TOP US CONSOLIDATION LOAN LENDERS in FY 2006:

1. Federal Direct Student Loan Program
2. Sallie Mae
3. Citibank
4. Nelnet
5. NextStudent
6. JP Morgan Chase
7. Goal Financial, LLC
8. College Loan Corporation
9. AES/PHEAA
10. Student Loan Express
11. Wachovia Education Finance

SOURCE: www.wikipedia.org

Federal Family Loan Program

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In the United States both the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP) include consolidation loans that allow students to consolidate Stafford Loans, PLUS Loans, and Federal Perkins Loans into one single debt. This results in reduced monthly repayments and a longer term for the loan. Unlike the other loans, consolidation loans have a fixed interest rate for the life of the loan.

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.

The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).

In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP. Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs.[1] In 2008, turmoil in the financial and credit markets has led to the suspension of many loan consolidation programs, including Sallie Mae, Nelnet and Next Student.

SOURCE: www.wikipedia.org