Student Debt Consolidation

Student Debt Consolidation

You paid for college the way most people do-you borrowed. Back then, financial aid was a necessary investment in your future. But now that the future's here, those payments might be more of a burden than you had expected. If you have more than one college loan to repay, a student loan consolidation may make your life a lot easier.

The basics of student loan consolidation
Consolidating is similar to refinancing your mortgage: You obtain one large loan and pay off all of your smaller loans. Student debt consolidations are subject to federal regulations and can be done directly by the federal government or by any FFEL (Federal Family Education Loan) lender. Here are some key facts:

-Interest rates are calculated based on the rates of the loans that are being consolidated.

-Regulations outline the maximum interest rate a lender may charge. Since there's no stated minimum interest rate, shopping around with different lenders may turn up a slightly lower rate.

-The length of the repayment term, typically 10 to 30 years, is based on the amount of education-related debt outstanding.

-Student loans can't be consolidated until they're in repayment mode.

-There are no upfront fees for student loan consolidations.

-Only direct and FFEL student loans can be consolidated; private loans are left out of the deal.

Consolidation advantages
The consolidation will streamline your repayment by replacing several payments with one.
The new repayment period will normally be longer, which means lower monthly payments.

The disadvantages
-If the repayment period is longer than the original loan term, the amount of interest you pay over time will be higher.

-You may lose benefits or incentives offered by your current lender.

Student loan consolidations help maximize the investment you made in your education by providing more manageable repayment terms. Check with lenders to find out specifically how your loans can be streamlined. In college, you learned how to do homework; now go and do a different kind of homework and apply your education to the real world!

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