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[S1091]Student Loan Debt Consolidation

by Simon Rand, Sim

As with most debt, people are looking to simplify, simplify, simplify. This typically means combining debt to one low-interest payment. The answer for most college and postgraduate students is a student loan debt consolidation. The whole enterprise of student loan debt consolidation is wide and varied. A great many lending institutions, both private and federal, are out there waiting to lend a hand and a great deal of money.

When considering student loan debt consolidation, it would be wise to take it step by step. A very simple and useful first step would be in the direction of your college advisor's or financial aid administrator's office. You can begin the process by first finding out if student loan debt consolidation is in your best interest, and if so, where and how to start.

Qualifications for student loan debt consolidation must be the first consideration. There are some basic guidelines to follow:

1. Students NOT enrolled more than half-time, or students out of
school for 3-6 months.

2. Students in grace period (up to 6 months after leaving school),
or with existing loans in deferment or default status.

3. Students with no previous consolidation loans.

Of course, there are exceptions and instances where these general qualifications for student loan debt consolidation will not apply, especially in the case of some postgraduate programs.

When applying for a consolidation loan, another basic consideration is to weigh the differences between federal (a.k.a. direct) consolidation loans as opposed to private consolidation loans. These two types of student loan debt consolidation programs differ mainly in terms of interest rates and credit ratings.

Federal student loan debt consolidation requires that the applicant have at least one Direct or Federal loan outstanding, such as a Federal Family Education Loan (FFEL). Currently, the interest rate on federal loans is based on the average of the loans being consolidated. Once the interest rate is calculated it is fixed for the life of the loan.

Private student loan debt consolidation interest rates can range from the current prime lending rate to whatever the loan institution sees fit, based on credit rating. Those who apply for this kind of loan must have a good credit rating or provide a cosigner with one.

Student loan debt consolidation will take a degree (forgive the pun) of due diligence and patience to complete. But in some cases it may decrease your student loan payments up to half and simplify your life by even more. The length of consolidation loans can span from 10-25 years, with extended plans available from 15-30 years. On the bright side, the interest paid on most student loans and/or student loan debt consolidation is tax deductible.

In the "big picture" of life an education is a priceless commodity. Knowledge is power and with that power great things can be accomplished.

You can combine several of your student or parent loans into a single student loan debt consolidation. You can consolidate your federal student loans too, but make sure that you do not consolidate both your federal student loans and private student loans into a single student loan debt consolidation program. Just as other debt consolidation loans, you must make your student loan debt consolidation payments to a single lender, who further disburses to your old creditors.

To go for debt consolidation of your student loans, your minimum balance should be $5,000, and you must either be in the six month grace period after your studies, or are already repaying your student loan.

Before selecting your student loan debt consolidation option, review all the advantages and the disadvantages:

• Through debt consolidation you make your student loan payments to a single lender.

• Depending on the balance of your loan amount, your consolidated student loan has an extended repayment term from 10 to 30 years.

• When negotiating with your bank or financial institutions, ensure that your phased repayment plan allows you to easily meet your monthly payments and have a good credit rating, at the same time.

• The rate of interest for student loan debt consolidation is capped at 8.25 percent for federal student loans.

• Once the rate is fixed you cannot take advantage if the interest rates fall in future.

• There are no fees charged for student loan debt consolidation.

• Once approved, you cannot undo your debt consolidation of your student loans as they have already repaid in full to your previous creditors, and they no longer exist.

You can still obtain debt consolidation for your over due, or unfulfilled, student loans if you negotiate a satisfactory repayment plan with your bank, or debt consolidation lender. Married couples, too, can consolidate their individual student loans together. This is regardless of how much each owns before consolidation, and must now agree to pay the consolidated amount.

Article Source : College Student Loan

About Author

Both Simon Rand & Gibran Selman 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.

Simon Rand has sinced written about articles on various topics from College Student Loan, Online College and Buying and Selling Home. Simon is the pen name for a professional writer on many topics. His work includes book authorship, TV producer and independent writer for many national magazines.