Posts Tagged ‘school loan consolidation’

School Loan Debt Consolidation – What Students Should Know?

Consolidation Loans incorporate several student or parent loans into one even bigger loan from a solitary lender, which is then used to settle the balances on the other loans. It is very similar to refinancing a mortgage. Consolidation loans are available for most federal loans…including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well. School Loan consolidation is among the most important and advantageous financial decisions recent graduates and former students can make.

Why Do Most Students Consolidate Their School Loans?

– To lower monthly instalment amounts by up to 45%

– To give them an opportunity to fix their credit score

– To make just one single student loan payment monthly

 

The Information on School Loan Consolidation Discounts.

 

The key reason why Lenders Supply Loan Discounts.

The Higher Education Act of 1965 sets the uppermost level of interest rates and fees on student loans. This helps protect loan gouging by student loan lenders, making access to student loans relatively easy for people who are are anxious for financial aid. Nothing, yet, prevents a lender from charging lower rates of interest and fees. (The illegal inducements regulations prevent lenders from providing immediate rebates, which would be similar to paying borrowers for their loans. Yet, most lenders work around these restrictions by instituting a 30 days delay in rebate discounts, or by providing the discounts when the loan enters repayment)

Lenders offer loan reductions for competitive reasons. Originally the competition was with the Direct Loan program. Still, with the repeal of the single holder rule, lenders are increasingly competing with each other for the highly profitable student loan market. If you presently have multiple student loans, you should get the proper information regarding consolidation of those loans.

Federal Loan Consolidation-Do Not Get In Debt Over Your Head

 

 

With the high cost of a college education today, it is no wonder students are relying more on loans than ever before to help them make ends meet, according to the College Board. The good news is that interest rates are currently at record lows of less than 3 percent on the Stafford.

To make smart decisions about borrowing, you still need to plan ahead now and understand your options when it comes time for repayment. Here are some simple guidelines that apply to the major federal loan programs–the Perkins, the Stafford, the PLUS–as well as independent bank loans.

SET A LIMIT

Keep in mind that every dollar you borrow must be repaid, with interest, which can really add up over a 10-year (or longer) repayment term.

It’s easy to think a $200-a-month payment is not a big deal, but those payments can take a big chunk out of your monthly income, and you’re going to need to pay your bills.

To get some idea of how much is too much, you need to estimate how much you’ll be able to pay back once you graduate. That involves estimating your future salary and expenses.

The best way to do this is to use a budgeting calculator available on the Web site of a major lender, such as Bank of America (www.bankof america.com/studentbanking). Calculators let you estimate monthly expenses–rent, utilities, food, clothes, car payments, insurance, etc. Then you compare those expenses to your estimated salary. Some calculators provide salary info, or you can find Bureau of Labor Statistics salary averages at www.bls.gov/oco/home.htm. By subtracting your estimated expenses from your estimated salary, you can predict how much you can afford in monthly loan payments.

AVOID DEFAULT AT ALL COSTS

If you do wind up borrowing more than you can afford, you run the risk of defaulting, or failing to pay back your loan according to agreed-upon terms. These terms are specified in a promissory note, a legal document that binds you to make regular payments.

Default usually results after you miss payments for 180 days. Many defaulted loans are sent to collection agencies that may charge costly late fees and take money from your wages. Worst of all, a defaulted loan can haunt you later because it will be recorded as part of your credit history for seven years. Lenders refer to your credit history when you apply for any major loan.

Credit bureaus keep close tabs on delinquencies, says Tom Lustig, vice president and director of marketing at PNC Bank. If lenders see you have a defaulted loan, they may deny you a mortgage, car loan, credit card, or personal loan, or charge a higher interest rate.

Most lenders provide students with charts to help track repayments. Keep in mind: If you can’t make a monthly installment, immediately contact your lender or servicer (the company that owns your loan) to discuss the problem. Plus paying on time has further advantages–many lenders will give about a 1 percent discount to students who make

UNDERSTANDING THE TERMS

Knowing the terms of your loan–the conditions by which you have borrowed and are obligated to repay the money–can help you avoid default. But first you should start by understanding some basic loan terms:

Grace period. A period of time–usually lasting six months after you leave college–when many student loans don’t require repayment. After the grace period, a deferment or forbearance can temporarily suspend repayment.

Deferment. A period when a borrower who meets certain criteria may temporarily stop loan payments. Depending on your type of loan, the federal government may pay the interest on it during your deferment period. New borrowers might be eligible for a deferment if they are still enrolled in school half-time or full-time; unemployed; studying in an approved graduate fellowship or rehabilitation program for the disabled; or experiencing economic hardship.

Forbearance. The temporary suspension of repayment in cases of hardship. Anyone with student loans may claim forbearance for six months at a time, for up to a total of three years, but interest still accrues.

Loan consolidation. Combining several loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. Consolidation can lower the monthly payments and extend the repayment period to a max of 30 years, but you’ll pay more interest.

Even if you have one loan, it is a good idea to use consolidation to lock in a low rate. It is a fact that lenders offer incentives and interest rate reduction plans, so it pays to shop around.

All in all, loans can be a viable option for paying for college, as long as you borrow within your means and keep up with repayment.

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