Here is typically how a student consolidation loan works. When a student first applied for several loans from several different agencies and student loan providers, they each gave a different interest rate and term for paying back the loans. The idea of student loan consolidation, is to take all the different student loans and put them into one easy convenient loan. You them only have to make one monthly loan payment every month, instead of several loan payments every month over time. This saves the student both time and money. Having a lower interest rate and less checks to write every month are a couple of advantages of doing a student loan consolidation.
5 Helpful Benefits of Student Loan Consolidation
1. Lower Monthly Payments. Depending on your student loan situation and the type of lender you choose, you may be able to lower your monthly payments by up to 50%
2. Having Simple Loan Payments. By consolidating your student loans, you only have one loan payment per month and one check to write. This is very beneficial if you are writing several checks every month to multiple lenders.
3. Having Fixed Interest Rates. With some federal consolidation loans you can have a fixed rate for the life of your student loan. It’s best to do research to see what the best interest rates and term you are eligible for. You can check online to calculate the interest rate on a new student consolidation loan based on the rates of your current student loans. You can then round up to the nearest 1/8th of a percent of the weighted average of the interest rates on your eligible student loans.
4. Extending Your Payment Period. You may have a lot of student loan debt. With federal consolidation loans you may be able to extend the payment term up to 30 years. It’s a good idea to realize you will end up paying more interest over the life of your student loan consolidation. The idea is to get some leverage until your career takes off. You can focus on making money instead of several monthly loan payments.
5. In School Consolidation Programs. While still in school, eligible students can lock in a low rate. This would put you into repayment status, but since you are still in school, you are automatically put into deferment. The drawback of consolidating your loans while in school, is that you lose your 6 month grace period. The solution to this would be to request forbearance for up to 1 year on your student loan consolidation. H