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[C969]Consolidate A Student Loan

by Ken Charnley, Ken

There are federal student loans and private student loans. Federal student loans are backed by the government, which means that the lending institution is guaranteed to get back the money they lend you from the government. This is why they can offer such low interest rates. Private student loans are not backed by the government and rates are offered based on your credit worthiness. Interest rates are usually higher in these loans.

There are two types of interest rates in student loans: subsidized and unsubsidized. Subsidized student loans either do not accrue interest while the student is enrolled in school or else that interest is paid by someone else. Either way, you can rest assured knowing that your subsidized student loan is not adding interest to the principal while you are getting your degree.

Unsubsidized loans do accrue interest while the student is enrolled in school. If not paid, the interest will be added to the principal or original balance borrowed, and ultimately increase the amount of the loan and the amount of time it will take to pay it off.

In order to qualify for a federal loan, students must complete the FAFSA form. Do this straight away. Find out if the financial aid offices at your schools of interest require that other forms be filled out. Some require that you fill out the College Scholarship Service's profile application. It is free to file a FAFSA form, but the College Scholarship Service's application requires a small fee.

Some loans that you may apply for include the PLUS loan, Stafford loan, International Student loans, Study Abroad loans, Act Education loans, and College Loans Solutions.

The Federal student loan program has benefited thousands of college students in the forty years since it was introduced. Interest rates for the program have historically been quite competitive, and the program has allowed many people to acquire a college education who otherwise might not have been able to afford one.

At the moment, interest rates on Federal student loans are the lowest in history, but that is about to change. On July 1, 2005, the interest rates on Federal student loans will rise, due to an increase in the price of Treasury, bills, to which the interest rates on student loans are tied.

While an increase in interest rates is seldom viewed as a good thing, knowing about it ahead of can be helpful. Between now and June 30, new graduates or those who have been repaying existing loans can consolidate their student loans at current rates. The rates currently vary, with fixed rates being slightly higher than adjustable rates. Those considering consolidation might wish to convert their loan to a fixed rate. Depending on the amount of the loan, borrowers may extend their loan terms to as long as 30 years.

There is also legislation pending in Congress that would change the Federal loan system so that all future loans are adjustable rate, with no fixed rate option. This will save the government money by not allowing students to lock in long-term loans at low rates during times of increasing interest rates. Students who wish to obtain a fixed rate loan may not have much longer to do so.

Rates will vary slightly from lender to lender, and the market for loan consolidation is quite competitive. Those wishing to consolidate their loans should consider shopping around for the best deal while time permits.

Article Source : Pg. 16

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Both Ken Charnley & Charles Essmeier are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Ken Charnley has sinced written about articles on various topics from Chapter 13 Bankruptcy, Cooking Tips and Bankruptcy Law. Ken Charnley is a personal finance publisher whose website is dedica. Ken Charnley's top article generates over 1000000 views. to your Favourites.

Charles Essmeier has sinced written about articles on various topics from Free Credit Report Score, Mortgage and Cars. . Charles Essmeier's top article generates over 49500 views. to your Favourites.