Do you want to consolidate your student loans?
If you’re unsure about what you should do then you need to understand what a student consolidation loan means.
Student loan consolidation is getting all your debts under one lender. For example you have a loan with lender A and lender B. When you consolidate you put both loans with A and B together with a new lender C.
By consolidating your student loans you can lower your monthly repayments. We’ll get to that shortly.
Federal Student Loan Consolidation
The most common time to consolidate your student loan is when you finish your studies. However you must be eligible to consolidate your student loan first. To be eligible to consolidate your federal student loan you must be:
- No longer enrolled at any school (or enrolled for less than half time)
- In the ‘Grace Period’ which is 6 months after you graduate OR must be actively repaying of your loan.
- Have a minimum of $10,000 in debt (there are lenders who will go as low as $7,000)
Ok, What’s A Federal Student Loan & Private Student Loans?
Having a federal student loan will give you more benefits than a private student loan.
- Interest is 100% tax deductable
- You can defer your payments on federal loans if you go back to study.
- Private loans have no advantages because it is similar to a personal loan. If you get a secured loan you’re rates are better if you get an unsecured loan you’re limited with the amount and you’re rates will be slightly higher.
Remember when you consolidate your student loans to keep your government federal student loans separate from your private student loans. Don’t consolidate them together or you’ll loose out on benefits.
Getting Student Loans
Did you know that 50% of all students who graduated had taken out a student loan of some sort? And the average amount borrowed was on or about $10,000. The interest rates for student loans in the past few years have dropped. Every year on the 30th of June new interest rates for student loans are released.
When you get a student loan make sure you don’t get an outstanding debt. Some students get loans of up to $80,000 which makes repayments extremely hard unless you’re pretty well off.
The best tip you can get is “Don’t over borrow” because you’ll have to pay it back one day. And when you over borrow it will affect your future credit ratings. If you’re repayments are well over 8% of your income you might find it hard to get mortgage after graduation. So keep you borrowing to a minimum.
Federal Student Loans
The average student who graduates from university will find it hard to make repayments for their student loan. Unless you win the lottery or have rich parents you won’t be able to celebrate your financial freedom just yet. But there is a way out for students with high repayments.
A standard federal student loan is easily spent during the course of your studies and you may find yourself with more than just one federal student loan.
As a young student you don’t want to be under pressure to make your federal student loan repayments while studying. In all respects, you still need money to buy term papers for sale.
In order to help students still studying and students who have recently graduated, financial lenders have developed programs to lower your interest rates from as high as 5.5% to as low as 1.75%.
Typically federal consolidation student loans can save gradates around 50% in payments every month which is around $160. However if you have more than one loan then your payments will be slightly high but you’ll still get the massive savings offered by a federal consolidation student loan.
The period that you can consolidate your federal student loan can be anywhere from nine years to twenty years. Most lenders will not require a credit or income check because these loans are designed for students. And like myself a couple of years ago, I was flat broke working at as a delivery boy.
Why Apply For A Federal Consolidation Student Loan?
Suppose you don’t come from a well off family and you don’t have a high paying job, and you want to go to college. A few years ago before consolidation loans most people would go to college and work part time so they can pay off their loans or maybe even quit college because the payments are too high or they can’t get enough time to study. Federal consolidation loans are here to support students in need of an education. So if you’re in this position then check them out as soon as you can.
How Does A Federal Consolidation Student Loan Work?
If you currently have a loan with two lenders for the total of $15,000 at 5% interest and you want to consolidate your student loan you can apply from a few lenders.
How it works is ingenious. The lender who is consolidating your federal student loan will pay off the two lenders that you’re already making repayments to. Then you’ll get a new loan with the new lender and you make all repayments to them with a much lower interest rate of around 1% – 2% for the next few years.
Now that you know how federal consolidation student loans work you should start looking for a new lender and consolidate your loan today. Good luck with all your studies and I hope you enjoy the rest of your studies.