How to Choose the Best Student Loan Consolidation Program
First of all, you need to understand what student loan consolidation programs entail so that you will have know-how of the best alternative paths to take in repaying your student loans. Basically, consolidation of student loans is a process in which a borrower has more than one student loan and therefore decides to acquire another loan to settle all other student loans. This program is aimed at offering some relief when the loan seems too difficult to repay.
While studying at a higher educational institution is claimed to be a great personal investment, it is difficult to deny that as a student, you may end up applying for more than one loan to finance your education. Subsequently, after the completion your studies, you may find yourself grappled with multiple monthly payments to the lender who offered you the loans. In most cases, it is quite problematic. This is because a number of loans increase the probability of their defaulting, missing regular repayments, or even going bankrupt.
The Benefits of the Loan Consolidation
Alternatively, converting all your accrued loans to a single amount provides lots of opportunities to you as a student in reorganizing the approach and strategy by which you’ll engage in the repayment procedures. What is of paramount importance is to find a company that guarantees landing the best deal that will help you to settle your debts. It is essential to note that there are various requirements to qualifying for consolidation of federal and private student loans.
Note that the federal student loan consolidation is only applicable to the student loans provided by the state. There are the following types of such student loans:
- Subsidized federal loans – they are given only to those who manage to prove that they are in need of the loan
- The unsubsidized federal loans – such programs are given to all students who apply and qualify without restrictions
- The PLUS loans – these are provided as an additional loan for students to cover their unpaid expenses that were not serviced by their initial loans
- Loan for the disadvantaged students
- Supplemental loans for students
If in any case, you have private loans to repay, it will not be possible to consolidate it within the federal ones. However, you don’t need to worry since an arrangement for a consolidation of a private student loan can also suffice, and in most cases, they accrue almost similar benefits. In addition, loan consolidation can only be accepted or granted if you are no longer a student, if you have never defaulted in your loan repayments, and if you are presently in the grace period or are repaying some loan. Finally, you must consent to make the payments through the income-based repayment or pay as you earn (PAYE) criteria.
Private Student Loan Consolidation as an Alternative
If you’re one of those students who sourced their loans through private lending institutions, there are also certain options. Although there might be a little difference between private and federal loan consolidations for students, one thing remains the same – the best student loan consolidation companies will avail the best possible methods of budgeting while making the repayment process easier for you.
Before applying for private loan consolidation, it is important to take the following factors into consideration:
- The amount of interest you will pay for every student loan accrued
- The number of lenders you are paying monthly
- The period you will take until you clear all your outstanding loans
- The amount you will be paying monthly on the private loan
- The veracity of your credit history
Through the assessment, you will also have a complete overview of whether to continue with your loan consolidation or not.
The Easy process of How to Consolidate Student Loans
After you finish your studies, the first thing you are supposed to consider is the number of lenders accumulated during the period of education and the way to clear all the debts. In any case, you deal with federal student loans, it will be much easier to consolidate them through a direct consolidation loan where you will be free to combine all the accumulated federal loans.
Since a direct loan consolidation cannot be used when it comes to private student loans, in this scenario, things are done a bit differently. For instance, apart from consolidating the loan, the private lenders have the capability of refinancing it with the sole purpose of saving some cash by lowering the interest rate. With the help of a student loan consolidation calculator, you can weigh on your options by calculating the best variable rates that suit your payment mode.
If you need to consolidate both the federal and the private loans into a single one, then opting for refinancing by a private company is the viable option for the loan consolidation student loans process. What’s more, this service also lets you consolidate defaulted student loans as you will repay the loan at much reasonable interest.
Consolidation of Student Loans – Pros and Cons
The pros of consolidating include:
- It provides a straightforward payment of your accrued student loans. Paying from one pool makes the repayment process much easier.
- Consolidation allows for the extension of the repayment periods. Hence, it gives you time to reorganize your finances.
- Most packages allow for low-interest rates especially if credit history is good.
- There is a chance to switch to the preferred interest rate.
Cons of consolidating encompass:
- There is a possibility to be indebted for a long period.
- Paying more interest in the end.
- There is a likelihood to repay certain benefits like reductions.
So if you have multiple student loans, the best solution is going for a student loan consolidation. In this case, the most important thing is to opt for the right company to work on the consolidation.