Student Loan Consolidation
It takes a great deal of money to pay for an education, and most college educations these days are financed either in full or in part with grants, scholarships, and student loans. There may come a time when you discover that you need a federal student loan consolidation program. These loan amounts may not seem like a lot of money when you are getting them, because they are disbursed to you at certain periods, in relatively small amounts, throughout the course of your education. At the end of your education, however, the amount that you owe in student loan repayment can be staggering.
There are two federal student loan consolidation programs: FFEL Consolidation loans or Direct Consolidation loans. As their names imply, FFEL consolidation is for FFEL loans, and Direct Consolidation is for direct loans. While you can get consolidation loans from various financial sources, the best place to get this type of consolidation loan is the United States Department of Education – the originator of your direct loans, or the lending institution that your FFEL loans came from.
Essentially, when you get a federal student consolidation loan all of the federal student loans that you received during the course of your education is combined to create just one loan – meaning that you only have one monthly student loan repayment bill to make. There are both advantages and disadvantages to consolidating student loans.
The benefits of a student loan consolidation are that you only have one monthly payment, with one due date each month. The loan payment for the consolidated loan may be lower than the combined payments of all of your loans before the consolidation. Instead of having the usual ten to twenty five years to repay the loan, you may have up to thirty years to repay the loan, making the payments relatively low, depending on how much your education loans were and when you get the consolidation loan, you will be locked into an interest rate that cannot exceed 8.25% for the duration of the loan.
The disadvantages to getting a federal student loan consolidation program are that it could take longer to pay off the loan than it would have taken to pay the individual student loans. Furthermore, the interest rate for the consolidation loan may be higher than the interest rates of the individual loans, and of course, the cost of your education – in total – may be significantly higher because of the increased interest and the amount of time it takes to pay off the consolidated loan.
If you are interested in a federal student consolidation loan, you can obtain such a loan when you have started repaying the loans, at any time after you have started repaying your student loans, during the grace period, and during any periods of deferment or during forbearance.
Before you enter into a federal student consolidation loan program, it is important to really pay close attention to what the cost of your educational loans will be, in total, without the consolidation, and with the consolidation – including all interest & payment years you will be making in both cases. Of course, you will want to go with the cheapest option, even if it means making multiple payments with different amounts and due dates each month. Your family accountant can easily work those figures for you in no time in which case will tell you exactly the best student loan repayment option depending on your circumstances & restrictions. If nothing else, you can set up the payments to be deducted from your checking account automatically each month as they come due which would easily solve this multiple monthly payment problems.
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