Top 7 Tips for Consolidating Your Student Loans

Top 7 Tips for Consolidating Your Student Loans

Federal student loan consolidation is a re-financing program that allows you to

combine all of your existing federal student loans into one new single loan.

There are no application fees, credit checks, or cosigners required for a

student loan consolidation. Benefits of consolidation include:

1. Lower monthly payments.

Student loan consolidation provides a longer repayment term, which in turn

lowers your monthly payment. This will free-up more money to use for other

expenses such as rent or mortgage payments, food and car expenses, utility

expenses, and credit card payments. Depending on your total balance, you

could reduce your monthly payments up to 53%. Because there are no penalties

for early or additional repayment, you can make larger payments when it becomes

affordable to.

2. Lock in a low fixed interest rate.

Currently, unconsolidated federal student

loans have a variable interest rate which changes each year on July 1st based

on the Treasury bill. By consolidating your student loans, you can lock in a fixed

interest rate for the life of your loan.

3. Customize a payment plan.

By consolidating your student loans, you’ll have the opportunity to choose a payment plan that best fits your current income level. Plans such as the Graduated Repayment Plan start out for the first

several years as a lower interest only payment, and then increase to a level repayment plan. This plan is helpful for those who need payment relief right out of school, while they look for a job and get established.

4. One payment per month.

By consolidating, you eliminate the need to make multiple monthly payments to each of your federal lenders. With all of your loans combined, you will only need to write one check each month. Plus, if you opt for automatic checking account withdrawal, not only will payment be simple, you’ll also save .25% on your interest rate.

5. continue your deferment and interest subsidy benefits.

Because federal student loan consolidation is simply a new federal loan, you will

not lose your loan deferment and forbearance benefits. Additionally, you will

continue your interest subsidy benefits on any subsidized FFELP or subsidized Direct loans that you consolidate.

6. Help your credit.

Consolidation takes all of your existing federal student loans, pays them off in complete, and combines them into one new loan. Instead of having multiple open loans with limited payment history, you will have just one loan. Your older student loans will be listed as paid in complete. In a nutshell, consolidation helps eliminate

open lines of credit.

7. Borrower benefits.

Consolidation offers cash saving borrower benefits for timely, automatic payments. You can reduce your interest rate by an additional .25% just by having your payments deducted from your checking account, and an additional 1.00% reduction for certain loan balance sizes, after making 36 on-time payments.

When should you consolidate?

You can consolidate during your grace period or during loan repayment. Your grace period is a six month no-payment window after you graduate or drop below half-time enrollment, before your loans go into repayment. Consolidating during your grace period provides the additional assistance of a .6% discount once your consolidation is complete. Because your interest rate is locked, the .6% discount remains for the complete term of repayment. Additionally, apply before July 1st, 2007 – interest rates are expected to increase, so take advantage of this year’s lower rates.

For more frequently asked questions, visit:

Federal Loans Eligible for Student Loan Consolidation

Here is a list of federal loans that are eligible for student loan consolidation:

1. Stafford Loans

2. Perkins Loans

3. Federal Direct Loans

4. Federal Parent Loans for Undergraduate Students (PLUS)

5. Federal Grad PLUS Loans

6. Federal Supplemental Loans for Students (SLS)

7. Federally Insured Student Loans (FISL)

8. National Direct Student Loans (NDSL)

9. Loans for Disadvantaged Students (LDS)

10. Auxiliary Loan to Assist Students (ALAS)

11. Health Education Assistance Loan (HEAL)

To apply online, visit

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