Archive for May, 2010

When Should You Consolidate Student Loans?

If you have just graduated from college, the likelihood is that you are under a large amount of debt in the form of student loans.  You might be wondering if there is any way to reduce the amount you have to pay.  One solution for reducing your debt is to consolidate your student loans.  Student loan consolidation is similar to refinancing a house on better terms:   although the principal of the loan will not be affected, the interest rates you can lock in when you consolidate student loans to a fixed rate can be substantially better, reducing your monthly payments by up to forty percent.  Plus, you might be able to stretch out your payment time to reduce your monthly payment amount even further.

The disadvantage when you consolidate student loans during your initial six-month grace period is that you must start making your payments right away.  This can be difficult if you have not found a job after graduation, although you can wait until just before the grace period ends to consolidate, and still receive the lower rates.  Furthermore, once you have consolidated your student loans, you cannot un-consolidate them again, so make sure to consider your choice carefully.

How is Interest Calculated When I Consolidate Student Loans?
When you consolidate student loans, your lending company pays off your government loan and issues you a new loan under its own name.  The typical way to determine the interest rate on the new loan is to take the average interest rates on all of the student loans, and offer a new rate that is an eighth of a percentage point higher (up to a maximum interest rate of 8.25%).  Although agreeing to a higher interest rate might not sound like a good reason to consolidate student loans, this rate is fixed over the life of the loan, whereas the government rates will fluctuate.  Since rates are at an all time low right now, locking in the current rates might be a good idea.  Furthermore, many banks give you ways to bring down the percentage rates.  For example, some lending institutions will drop the rate by as much as a quarter point if you agree to automatic deductions from a checking or savings account, whereas others drop the rates after a certain number of timely payments.  As an additional bonus, there is no penalty for paying off your consolidated loan early.

When Would You *Not* Want to Consolidate Student Loans?
Before you decide to consolidate student loans, you should carefully consider your alternatives.  For example, did you realize that it might be possible to have your student loan cancelled altogether?  Student loan forgiveness options include volunteering, for the Peace Corps for example, or working for the government in a low-income area as a teacher or doctor.  Cancellation is not possible, however, after you have consolidated your student loans.  If this kind of work interests you and is available, it could be a better option than loan consolidation.

Another time to hesitate before you choose to consolidate student loans is when you are close to finishing your payments.  Stepping up the payments and saving yourself some interest and the hassle of consolidation might be more advantageous to you.  

Finally, there are loans that you might want to keep open because they offer special advantages.  For example, if you are considering going back to school and you have a Perkins loan, you would not want to consolidate that with your other student loans.  The government will pay all interest on Perkins loans while you are in school, but if you have chosen to consolidate student loans, you will not be able to receive this benefit.  You could always choose to leave any special kinds of loans out of the consolidation mix, however.

How Consolidation of Student Loans Works by Joe Eitel

The consolidation of student loans can be a huge lifesaver. A college education is expensive, and it is almost impossible to get a degree without taking out at least a few student loans. However, these loans do not have to rule your finances for years to come.

Student loans can create a huge debt that hits you from nowhere. It is very easy to forget that you are (more…)

Student Loan – The Basic Facts

There are a lot of different ways of funding your way through college. You might be one of those students lucky enough to have a full scholarship. You may also have rich or generous parents who are willing or able to pay the bills.

However, many students are not so lucky. Most of the above funding sources will only pay part of the bill, not the total. And even if you can get all your tuition paid, you still have to come up with the money for rent, books, entertainment and other living expenses.


You may be able to get a job. This is a good idea for all students, but it is not always easy to do so. Some colleges are located far from towns with employment opportunities. Sometimes employers are reluctant to hire students as they usually cannot commit to full time work and will likely not be around during holidays. If you do manage to get a job, it will probably not be the highest paying job in the world, and you shouldn’t work more than part time. Remember that your main aim during your college years is to get the best grades you can, and working 40 hours a week just to pay your tuition would be self-defeating.


So that means that for many students, the only method of paying for college that will be available to them is to take out student loans. Going into debt is always a commitment, and it can be especially stressful before you have even started working and aren’t certain how you will pay back the loans. Student loans however, have a number of advantages over regular loans. First of all the rates and terms are more lenient. Student loans are likely to be at a much lower interest rate than most loans that will be available on the market for other purposes. They will also give you plenty of time to get on your feet and find a job after you finish your studies. This means they are not going to be due immediately after graduating.

Repayment periods on student loans are probably the fairest and most patient you’ll ever get in your life. These rates and terms reflect the faith that lenders put in today’s students. They know that ultimately, college is a good investment and most graduates will be able to pay back their debts if they are just given the time.

Types Of Federal Student Loan Consolidaion

If you are an American student or one studying in a U.S. citizen school, then you are entitled for federal student loan consolidation from the U.S government.

Federal student loan consolidation plans are applicable for all students whether you are still in college or a recent graduate or already into your new career.

If you are successful in your student loan consolidation application, it will help you to reduce the student loan payment amount every month and/or allows you more time to compensate your loans as a student.

If you currently have several student loans, it is simpler if you use federal student loan consolidation to consolidate them into one loan payment thus making it simpler to manage.

The Four Types Of Federal Student Loan Consolidation

The U.S government in a bid to attract more students to require their student consolidation loans have come up with four plans to suit the different needs of students.


1) Standard Student Loan Consolidation

The most student loan period is 10 years and the payment amount every month is fixed. This sort of plan is suitable for students who are able to afford to pay a fixed amount each month. The monthly interest wouldn’t be a big aspect in huge student consolidation loans

2) Extended Payment Plan

This sort of plan is identical to standard student loan consolidation other than it has a longer repayment period of between 15 to 30 years. The repayment period is subject to the student loan amount.

3) Graduated Payment Plan

This sort of plan is worthwhile for students still schooling and can only repay the student loan when they have a job after they graduated. The payment period is between 15 to 30 years. The payment amount each month usually starts low and increase steadily every 2 years. The intent is the as the student has worked for a longer time of time, their salary will increase accordingly and therefore able to pay a larger repayment student loan.

4) Income Contingent Payment Plan

This kind of plan is complex and is founded on the student’s income over a time of years. It is also dependent on the family’s annual gross income, other loan amounts owed, other assets, mortgages etc.

Most student usually choose graduated payment plan or the extended payment plan for their federal student loan consolidation.

Brief Overview On Debt Consolidation In Canada

Brief Overview On Debt Consolidation In Canada

All over the place in the world, numerous people experience debt crisis. If you are practicing the similar circumstances and you are a resident of Canada, it is fine to come to know that there are companies contributing Debt fortification services that you can revolve to for aid.
Definition of Debt Consolidation (more…)

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