Paying off a student loan can be as difficult as pulling teeth if the proper procedures are not in place. Organization is critical, and many times the loan payment process is not as simplistic as the borrower would want. Loan consolidation allows the borrower to "trim the fat" and garner a better understanding of the payment process.
Facts About Student Loan Consolidation
Simply stated, loan consolidation allows the borrower to focus on a single loan which is held by a single lender. Depending on the situation, the loan may have new terms and fall into the hands of a brand new lender. In order to consolidate, many lenders require the borrower to have a minimum of $7,000 in student loans. This process is not meant or designed for those students in marginal debt. In order to participate, the student must complete their given educational program or cease education in their given program.
The borrower must have an eligible federal loan in order to be allowed to participate. Also, private and federal loans ARE NOT allowed to be consolidated together. Many restrictions and guidelines are placed upon this loan option, and the student must meet certain criteria in order to qualify. For additional information students are encouraged to visit the National Student Loan Data System to research their loan history before making a decision regarding this process.
Advantages and Disadvantages of Student Loan Consolidation
Consolidation provides a fixed interest rate, and the borrower makes a single monthly payment to a single lender. The interest rate is determined by the rates of their OTHER loans. The maximum repayment plan ranges from 10 to 30 years depending on the plan selected by the borrower.
If the borrower is in a hurry to “kick the weight” of student loan debt to the curb, this process is not the answer. By taking this avenue the student will be repaying their loans for a longer period of time. Depending on their unique situation, an interest "spike" is also possible over an extended period as well. The increased interest could cause the total balance of the loan in question to sky rocket by thousands of dollars depending on the individual’s status.
In this loan process the interest rate is rounded to the nearest 1/8 of a percent...a mark of 0.125. The loan is presented in a "happy package" under the watchful eye of a single lender, but the repayment process and the overall interest rate will both increase.
Selecting a Lender
When dealing with student loans, loan consolidation or choosing a lender it's paramount to do research. Understand how the process works, and make the best decision based on the situation, NOT what looks good. When in doubt about a specific lender, the borrower is encouraged to contact the Department of Education.
Bryan Parker - Bryan Parker has been a passionate and successful writer for 20 years. His enthusiasm and love for his craft are second to none. His love ...
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