Consolidate Education Loan: 5 Points to Consider
After school, you may look at how to consolidate education loan amounts from when you borrowed to get through. Good for you – finishing is good, and consolidating can help bring down your payment and simplify your finances.
I decided to consolidate to avoid making all the little payments and put it into one big loan. Kind of like refinancing a mortgage, in a way. I have preferred it this way. If you need a forbearance, you only have to file the paperwork once, for example, and you get fewer bills. It has worked out well for me, so I recommend you look into it.
1. When can you consolidate?
In general, you can’t consolidate until you are out of school. Not to say graduated, but you have to be out of school 6 months before you can consolidate. You can find all the eligibility rules here at the studentaid website.
2. What kind of loan do you have?
If you have a direct loan with the government, you can likely consolidate fairly easily. Likewise, if your loans all came through the Stafford or other government FFELP (federal family education loan programs), you shouldn’t have a problem.
If you have a private loan, you will have to contact your lender and ask if they have any consolidation programs.
3. Where did you get the loan?
You will have to contact the lender directly and apply for consolidation. With a direct loan, the lender is the government, for example. Just check your statements and see who you pay, and contact them to apply to consolidate education loans.
If your loans meet all the requirements, you can often consolidate through your state educational loan operation. Also, some major lenders will consolidate student loans that meet all the requirements, regardless of where you are.
4. Interest Rate Fun
When you consolidate federal loans, you get a weighted average interest rate. This can stabilize your payments, and should leave you in a better situation. The Studentand link above links to a document with the current interest rates for the next year, in case you want to see where you stand.
Also, your subsidized loans will transfer into a subsidized portion of the consolidation loan, and your unsubsidized loans into an unsubsidized portion.
If you consolidate during your grace period, you can drop your interest rate by half a point – keeps the payment down.
5. How will consolidation benefit you?
The main key here, will consolidation reduce your payment? What about your interest rate? And how long will you pay? If you consolidate education loans, you may have a longer payment period with a smaller payment. You can use this checklist to help.
While it looks like you only have benefits by consolidating, I have found some drawbacks. You can find them on my consolidate your student loan page.
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