All About Federal Student Loan Consolidation and Its Specific Features
Student loan consolidation is essentially considered a tool to manage one or more debts. Such a loan also allows any student to combine his/her federal or private student loans into one single mortgage with extended loan terms, which subsequently minimize the monthly payment.
For US students, there are two types of student loan categories namely as mentioned below:
1. Federal student loans
2. Private student loans.
Federal Student Loan Consolidation
The Federal student loan consolidation allows a student to consolidate all his loans for one single loan at a lower interest rate. The student could also lengthen his term (tenor) of payment. Many financial institutions provide federal consolidation student loans. The students have a right to choose the most reasonable loan package that suits them.
But ultimately, like several other loan options, the federal student loan consolidation also has its disadvantages. Though the students are offered a consolidated loan for fewer monthly installments, it unanimously increases the full total amount that has to be repaid.
Nevertheless, some of the beneficial features of the Federal consolidation of student loans are as follows:
⦁ Interest Rate: Federal consolidation student loans have a lower rate of interest than most private loan schemes.
⦁ Monthly Payments: There is a subsequent reduction in your monthly payments. As a student, this can take the load off your monthly budget and you can also pay the installments easily.
⦁ Single Loan: With loan consolidation, there is only one paycheck to be paid each month. This is a very convenient and uncomplicated form of payment scheme for any student.
Eligibility Factor for Consolidation Loans
A student is eligible for federal consolidation loans when he/she is not enrolled in any school and has repaid the loans without any default. Even students who are in a grace period after post-graduation can apply for such loans. The minimum loan amount should be $10,000 or more.
Students having federal educational loans are also qualified to get a consolidation loan. Private education loans are not considered student debt consolidation loans. Many institutions and companies provide federal student consolidation loans such as credit unions, banks, and secondary markets.
Mixing up private loans and federal loans for student debt consolidation is not a good idea, as the federal loan interest amount is tax-deductible. Some loan amounts are also forgiven depending on the nature of the job or service. Private student loans are bereft of such benefits, as they are treated at par with normal loans. Combining private and federal loans for the consolidation of debts makes you lose all the wonderful advantages of a Federal consolidation loan student.
Student loan consolidation is specifically meant to minimize the monthly payment amount and for extending the repayable loan terms. It is very convenient for students struggling to pay their monthly installments scattered in several outstanding loan forms.
Three Tips For Federal Student Loan Consolidation
Federal student loan consolidation can be a great option for many people. You can generally still keep all the wonderful benefits of the federal loan programs, and possibly lower your payments or extend the deferment time. Here are a few tips that should help you during the process.
Private and Federal Loans
It’s important to keep your private loans and federal loans separate. While the idea of having one loan payment may be tempting, if you combine these loan types you will lose many of the key benefits associated with the federal student loans. Federal student loans generally have a more lenient deferment option, the interest is tax-deductible, and many can be forgiven if you work in certain fields. If you consolidate your loans together you will lose these benefits. Your best option is to consolidate all your federal student loans first, then your private student loans after.
FFEL Loans
An FFEL consolidation loan is great since it allows you to consolidate different types of federal loans into one payment. The consolidation will be done through a commercial lender. This will also help your credit rating since the credit bureaus are notified of a zero balance on the previous loans. As long as you are in a repayment plan, and have paid on time for three consecutive months you are eligible to apply for this type of loan.
The repayment period can be extended to as much as 30 years with an FFEL consolidation loan, which can also save you money on your monthly payments. Since your original federal loans are paid off under this program, you may be eligible for other federal loans through various programs as long as you are not in default on any other federal loan program.
Payment Schedules
One of the greatest things about a federal student loan consolidation is that you can turn several payments into one. You are usually able to take advantage of many different repayment options when you consolidate as well. When you consolidate your student loans, the loan terms are reset. This means you may be eligible for further deferments, forbearances, and other benefits that can help out in a pinch. The monthly payments are generally lower as well.
Three Insider’s Tips For Worldwide Student Loan Consolidation
Worldwide student loan consolidation is not as hard as it sounds. Research and diligence are two tools that are needed for this task. Below are three tips on how to make this process a little less daunting.
Consolidation From Abroad
Assuming that you obtained private loans in order to study abroad, you may find that consolidating the loans is tough. Not only is it tough to find companies who are willing to consolidate loans that were for use overseas, but you will also find that the interest rates are much more expensive than loans given to students who studied at home. The first tip would be to search online and find the lowest interest rate.
You can easily use a search engine to find these companies. Once you have found the directory, you will want to do research on the company. Choose a company that has the lowest interest rate but at the same time a company that is well established and always read the fine print.
Consolidations: Federal Or Private
The same rules apply when searching for a worldwide student loan consolidation when you went to school in your home country. You have a choice of using federal or private companies. Federal loans will almost always have the lowest interest rate and you can find them fixed if that is what you prefer.
However, soon all federal loans in the US will be fixed which will keep you from saving when variable rates go down. Private loan consolidators have a higher interest rate and mostly use a variable interest rate. This has its pluses and minuses too. With a variable rate, you could end up spending more than you would on a fixed rate consolidation if rates rise.
Worldwide Student Loan Consolidation
There are private institutions that may help with student loans whether you studied abroad or you studied at home. You should obtain a list from your college that will help with the decision-making process. Your college whether overseas or not will help with any and all loan requests. You need only make an appointment with financial aid.
If you are a student you can obtain worldwide student loan consolidations through perseverance and patience. You will want to take the time to assure you are getting the best possible deal from a reputable company.