quinta-feira, 25 de março de 2010

Student Loan Consolidation - Save Time & Money

Is Student Loan Consolidation a Good Idea?
Consolidating your student loans can be a tricky process. What goes into it? Is it a better deal than what I am paying now? Can I consolidate quickly? Here's the scoop.
Consolidation Loans combine two or more student or parent education loans into one bigger one from a single lender, which is then used to pay off the balances on the others. Doing this allows you to pay one lender for all your borrowed money, simplifying your bill paying procedures each month. It is very similar to refinancing a mortgage. Consolidation is available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, as long as many other types. Some lenders offer private consolidation for private education money you might have borrowed from someone other than the Federal Government as well.
Is this a good idea though? Other than making all your payments to one place what are the benefits? Generally, you aren't going to pay any more or any less in interest by consolidating, as the new loan takes a weighted average of your previous commitments to determine your new interest rate on your education consolidation rate. According to FinAid.org: "The interest rate on a consolidation loan is the weighted average of the interest rates on the ones being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%."
If you don't save on the interest than, what's the point? The benefit, in addition to consolidating with one lender is that you can consolidate borrowed money with any lender, there is no cost to consolidate and you get access to better repayment plans than the standard
education loans give.
For example, you can easily lower your monthly payments by consolidating educational debt by extending the repayment period a number of years, often making it an affordable monthly expense instead of a burden. Consolidation provide access to several alternate repayment plans besides standard ten-year repayment, as mentioned. These include extended repayment, graduated repayment, income contingent repayment and income sensitive repayment. If you do not specify the repayment terms, you will receive standard ten-year repayment.
Those last two options are of particular interest for low income students with loans, single mothers (or fathers) with education loans and anyone who may be unemployed at the moment or working only part-time. Those payment plans will be more sensitive to your economic circumstances than the regular repayment plans.
In the end, education consolidation is often a quick and easy solution to lowering your monthly loan payments, reducing your debt and keeping your education expenses manageable.