College Student Loan Consolidation Programs

You Are Here: Home » Student Loans » College Student Loan Consolidation Programs There are a number of reasons that graduates consider student loan consolidation programs â€" all of which are fully validated. This does not mean, however, that consolidation is always the answer. No matter what your reason for considering consolidation, you need to take the time to carefully consider your situation. You should also understand all of your options and how each one will impact your life today and twenty years from today since, in most cases, you will still be making loan payments. What is Consolidation? Loan consolidation means taking all of your loans and rolling them into one loan with one lender. Lenders do this by purchasing all of your old loans, often at a discounted rate. They then calculate how much they spent on all of your loans, add in any additional fees that they or your other institutions charged and your new interest rate. Since this is a completely new loan so you will be provided with new loan terms and conditions. Can You Consolidate? There are some restrictions on student loan consolidation, all of which you need to be aware of before looking for a consolidation loan. If you are consolidating for the first time, you can consolidate one or many loans. If you are considering reconsolidation, you must be able to add another loan to your current consolidation loan. You should also be aware that you cannot consolidate a loan that is in default. You will either have to catch up on your current payments or make satisfactory repayment agreements with the consolidation lender before you can consolidate your loans. Keep in mind that this also means continuing to pay your current loans on time until the consolidation process is completed. Failure to do so could result in a denial for your consolidation loan. Married couples are no longer able to consolidate their loans together but each person can consolidate their loans individually. This applies to parent loans and student loans as well. While both student and parent can each consolidate their loans individually, they cannot consolidate the loans together. To consolidate your loan, your loans must be active or in the grace period. You can no longer consolidate loans while you are still in school. If you consolidate your loan during the grace period, you are also likely to lose your grace period. This should be taken into consideration before applying for a consolidation loan while still in the grace period. Should You Consolidate? Now that you know whether or not you can consolidate, you should carefully consider whether or not you should consolidate. The two are not one in the same. While you may be able to consolidate your student loans, it is not always a good idea. One of the situations in which consolidation may not be a good idea is if you have a Perkins loan. Perkins loans have a lot of benefits for the borrower. If you consolidate your Perkins loan, you will lose those benefits. The loss of the benefits may end up being more destructive to your repayment period than the consolidation benefits. You also need to know that, by consolidating your loans, you are resetting the loan term. In most cases, this means more interest paid on the life of your loan. If you have already paid a good portion of your student loans, the consolidation of them may not be worth the extra interest expense. When Consolidating is a Good Idea Consolidating loans for students can often be a good idea, especially right after graduation when you are nearing the end of your grace period. By consolidating multiple loans into one loan, you can simplify your loan payments. You can also receive a lower monthly payment on your consolidated loan than you would have with each individual loan. This, too, can make your payments easier to manage. If you are struggling to make your monthly payments or are having a hard time keeping track of all of your loans but you did not recently graduate, consolidating might be a good idea as well. This can help you get back on track before you start experiencing the damage of defaulted loans. Another reason that may make consolidation a good idea is a significant life change like marriage or the birth of a child. Carefully consider if you will be able to make your loan payments as they currently are and, if it seems that you may not be able to, consolidating may be your best option. How to Approach Your Consolidation Because consolidating your loan means that your repayment schedule is started over, you will usually have to pay more interest over the life of your loan. For this reason, you should choose the shortest loan term possible. While this may seem like a bad choice because the monthly payment will be higher, it is actually a good choice because it means that you will pay less interest over the life of your loan. Also, shop around for your consolidation loan. Different lenders offer different benefits and loan terms. Since this is a long term commitment, you should approach it like you would a home or car purchase. Find the lender that fits your needs â€" both currently and in the future â€" the best.