Posts Tagged ‘student loan debt consolidation’

Student Loan Debt Consolidation


Debt consolidation involves taking out a loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of service from a single loan.

Debt consolidation can simply be a merging of series of unsecured loans into onne unsecured loan, but more often it is a secured loan against an asset that serves as collateral, usually a house. In this case, a mortgage is secured against the house. The home guarantees the loan and therefore allows a lower interest rate than without it, because in collateralizing, the asset owner agrees to allow the forced sale (seizure) of assets to repay the loan. The risk to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some savings. Consolidation can affect the debtor’s ability to meet the debts of the bankrupt, so the decision to consolidate must be weighed carefully.

Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards have interest rates far greater than even an unsecured loan from a bank. Debtors with property as a home or car may get a lower rate through a secured loan with property as collateral. Then the total interest and total cash flow paid on debt is lower allowing the debt to be paid earlier, incurring less interest.

Student Loan Consolidation;

In the United States, federal student loans are consolidated somewhat differently from the UK, as federal student loans are guaranteed by the U.S. government.

United States;

in a federal student loan consolidation, existing loans are purchased by the Department of Education. Interest rates for consolidation are based on the rate of student loans that year, which in turn is based on the rate of treasury bills to 91 days in the last auction in May of each calendar year.

Student loan rates can vary from the current minimum of 4.70% to a maximum of 8.25% for federal Stafford loans, 9% for PLUS loans. On consolidation, a fixed interest rate is set based on the prevailing interest rate at that time. Rebinding does not change that rate. If the student combines loans of different types and rates into a new consolidation loan, the weighted average calculation will establish the appropriate rate based on prevailing interest rates at the time of the different loans being consolidated together.

The federal student loan debt consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike the consolidation of private sector debt, student loan consolidation does not incur costs to the borrower; private companies make money from the federal government subdidies of the students consolidation loan.

Student loan debt consolidation can be beneficial to the credit rating of the student, but it is important to note that not all federal student loan consolidation loans report to all credit bureaus.

United Kingdom

The rights of UK credit students are guaranteed and are retrieved by a system check of the student’s future income. Student Loans in the UK can not be included in bankruptcy, but do not affect the credit rating due to the payment of people recover from wages in the future students in their home by the employer before rent is paid, similar to income tax and National Insurance contributions. Many students however, are struggling with debt after completing their courses

the level of personal debt in the UK has also increased remarkably in recent years:

“Total UK debt amount at the end of February 2008 was £ 1,421 million. The growth rate increased to 8.9% over the past 12 months.

Concerns;

in recent years, reports of the media have expressed concern about the use of consolidation loans. The concern is that many people are tempted to consolidate unsecured debt into secured debt, usually your home protected. Although the monthly payments can often be less than the total amount paid is often much greater because of the long loan period. Debt consolidation sometimes only treats the symptoms of debt and does not address the root problem. In some circumstances, snowballing debt may be a better solution.

Alternatives

Other options include overburdened debtors credit counseling, debt and personal bankruptcy. Some are consolidation lenders to renegotiate with creditors on behalf of the debtor.

Student Loan Debt Consolidation – An Overview

In a student loan debt consolidation loan, you can combine your federal student loans into one loan with a single monthly payment. Repayment of a student loan debt consolidation loan may be significantly lower than the payment required under the standard 10-year repayment option. The Federal Family Education Loans (FFEL) Program, banks, secondary markets, credit unions and other lenders provide the student loan debt consolidation loan. The William D. Ford Federal Direct Loan (Direct Loan) Program, the federal government determines the student loan debt consolidation loan.

Most federal education loans are eligible for inclusion in a student loan debt consolidation loan, including subsidized and unsubsidized Direct and FFEL Stafford Loans, SLS, Federal Perkins Loans, Federal Nursing loans & Health Education Assistance Loans. But private education loans are not eligible for inclusion in a student loan debt consolidation loan.

To find out which loans may be eligible for inclusion in a student loan debt consolidation loan, you should contact the Direct loan Origination Center’s Consolidation Department if you are looking for a direct student loan debt consolidation loan. Contact a participating FFEL lender if you are applying for a FFEL student loan debt consolidation loan.

It should be noted that you still have the eligibility for student loan debt consolidation loans after your graduation, leaving school, or drop below half-time enrollment. You can also get a student loan debt consolidation loan when you are at school. However, you must attend at least half time, and have at least one Direct Loan or FFEL in an “in-school period ‘which usually means that you have been continuously registered at least half time since the loan was paid. There are some conditions that must be met for you to qualify for student loan debt consolidation loan, particularly if you are delinquent or in default, your loan holder will be able to give you all the necessary information.

If the same holder holds all the FFEL loans you want to consolidate, you must obtain a student loan debt consolidation loan from that holder, unless you are unable to get a loan with income-sensitive repayment terms acceptable to you. To be eligible for a William D. Ford direct student loan debt consolidation loan, you should have a direct Stafford subsidized or low-interest loan that’ll be included in the debt of student loan consolidation loan or have at least one Federal Family Education Loan (FFEL) programme Stafford subsidised or subsidised loan.

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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