Student Loan Consolidation

In order to manage one’s student loans well and become much freer with low monthly rates, a college graduate or his parents may opt for a student loans consolidation program. Since it is easier to manage a single loan, it will help if one finds it easier to compare individual loans versus a single loan. There are tools online that assist borrowers in computing for their student loan interests. One such tool is the student loan consolidation calculator.

Similar to a home mortgage calculator used for a different purpose, the student loan consolidation calculator almost instantly computes for the monthly interest rates and the total costs versus the consolidated rates. Some online tools include the standard calculator while others include extended or graduated repayment calculations.

These calculators show the different student loans providers and their existing interest rates. The federal student loan lenders include Stafford, Perkins, and PLUS. Their rates are pitted against the consolidated interest rates being offered in order to immediately compute for the monthly payments.

Using such calculators the borrower can get a clear view of how significant the decrease in the monthly payments will be if the separate individual loans get consolidated.

Those looking to consolidate their student loans should know that there are certain qualifications before one becomes eligible for student loans consolidation. Since the lenders are extending the loan terms from 10 to 30 years at lower interest charges, they have stricter policies in place.

One such qualifier is the amount of outstanding individual loans that are due. Some lenders require a total of $10,000 while others require loans to be as high as $20,000 before his consolidation plan gets approved. This may be easy to meet since most people who have student loans usually acquire as much as $20,000 or more overall federal student loans until they graduate.

As of late, those with several loan payments happening at the same time are advised to consolidate at once since the rates on current loans are going to increase by 2% while new loans will have as high as 6.8% rates. Those rates are considered to be the highest every reached in the last six years.

The consolidated rate is pegged at 4.75% and borrowers can lock in on that percentage for the rest of their student loans consolidated term. For those parent with existing PLUS loans, their rates will go up to 7.94%. To simulate the increase, imagine a $20,000 consolidated loan total within the grace period of 6 months – this type of loan can produce a savings or over $5000 if borrowers will consolidate.

These amounts can be computed online by the borrower by using any of the available student loan consolidation calculators. When totally convinced by the amounts resulting from the computations, one can start scouting for the best lending company whose rates and benefits will benefit the person more. One should research carefully and compare the options so he can decide wisely on an easy plan that he will endure in the years to come.

Graduation is a family milestone as one member steps into the opportunity to become more successful. Parents who took some student loans to see their kids through college begin their payments when their student graduates. Since the additional expense can become a burden to a financially challenged family, it is good to know that there are student loan consolidation programs that can help.

There are so many lending companies that offer so many forms of consolidation programs. Most of these companies have websites that are easily accessible. Borrowers can search for these websites so they can get themselves informed about the ongoing rates and the differences in the offerings.

Before zooming in to a certain lender, one should weigh the advantages and disadvantages involved in student loan consolidation programs.

The positive aspects to know about:

• The low interest rates mean low monthly payments for better or increased cash flow. This can mean savings the person can use for other equally significant expenses. Low monthly on student loans can help reduce the borrower’s stress, which can help him become more productive financially.

• A single bill is easy to manage well. Student loan consolidation programs prevent a person from getting multiply bills from different lenders. This addresses any confusion that may arise from improper tracking of bills. Consolidation results to one clean billing that is due to just one lender. That makes it all very simple for the borrower during payment time.=

• Consolidation helps improve one’s credit score since all student loans will be wiped out from the record. Only one credit will be reflected and that is going to earn some good credit points especially if the bills are paid on time.

The negative aspects to know about:

• The overall total of the loan is increased since the loan is spread over a longer payment term. The student loans that get consolidated in one new loan can endure for as long as 30 years depending on the choice of term of the borrower. The longer the payment term, the lower the monthly rates, but the overall cost greatly increases.

• There are requirements to be met before one gets qualified for student loan consolidation programs. Lenders employ stricter rules on qualifications. Some providers only accept from certain select lenders only and the loan amounts due for the borrower from these specific lenders should be $10,000 up. It is also an important qualifier that the existing loans have not been defaulted by the borrower.

• Borrowers have other better options aside from consolidation. There are programs available from local government centers that offer student loan consolidations too. Other lenders also offer pardon or forgiveness for current loans if the borrowers will apply for it.

Before jumping into anything in terms of student loan consolidation programs, graduates and parents and advised to weigh their options carefully first. Check for other options that may be available to him in his locale to prevent paying much higher amounts eventually. Ask around and do some research first and avoid getting whatever lender offers first.

So what are the key benefits when you consolidate student loans? Are they reason enough to apply for consolidation? See for yourself.

• Single monthly payments. When you consolidate your student loans you replace the multiple payments you make on your various loans with a single monthly payment which is made to your already consolidated loan. Basically, it simplifies the whole process of payment.

• There are alternative repayment plans. Consolidation would provide you with the access to different repayment plans such as the extended repayment, graduated repayment and the income contingent repayment. Although the same plans are also available to unconsolidated loans, the term of extended repayment plans depends upon the balance of the loan, which is considerably higher for a consolidated loan. These alternate repayment plans can also decrease the size of your monthly payments by up to 50% making these payments more affordable and manageable.

• Reduced rates on some PLUS loans. To better maximize this reduction in the interest rate, the PLUS loan should also be consolidated.

• Consolidation would reset the 3 year clock on deferments, certain ones, as well as forbearances. Basically a consolidation loan is a new loan thus it has its own new set of deferments and forbearances.

• The ability to switch lenders for better discounts on your loans. If you consolidate your student loans you would then be allowed to switch from one lender to the next. You can also opt to switch from FFEL to a Direct loan and vice versa. If you patiently look around, you would be able to avail of better discounts on your loan interest rates as well as better rebates on your fees.

But with the good eventually comes the bad and Consolidated Student Loans are no exceptions. Here are now some flaws that you might want to take a peek at before you make that decision.

• Remember that you are only allowed to consolidate once. The current law only allows borrowers to consolidate once. So if you were to include a previously made consolidation loan to your new one, you would be adding other loans to the consolidated one which makes your ability to switch from one lender to another extremely limited. Also take note of the fact that even if you are able to consolidate a previously made consolidation loan to your new one, the interest rates on your consolidation loan is fixed and cannot be changed.

• Inferior Loan Discounts. Lenders who offer borrower’s benefits for when they make electronic transfers as well as when they always pay on time is likely to offer unappealing benefits when it comes to consolidation loans. However this might soon change as we are expecting to see increased competition among consolidators concerning price. They might start offering better and much improved discounts so that they could get borrowers to switch lenders.

So there it is, some of the key advantages and disadvantages of consolidating student loans. I recommend that you do some research as well as asking around for the best companies to go to for a consolidation on your student loan. Your research would surely pay off if you find one amongst the many companies that offer you the best price as well as the most suitable to your current financial situation.