So you are finally done with college after the four grueling years of studies, tests, researches etc. time to be free and live to the fullest: but this would seriously depend upon how much loan you have taken to finance your studies. More than half of the students graduating from college have incurred a single or even multiple student loans. This has become essential due to the spiraling cost of living.

Many types of student loan are available to the students today. The two most important and common categories of student loan are federal student loans and private loans. The US department of education's Federal student aid programs, funds the federal loans, which are the easiest to consolidate. Almost $60 billion is given as work study support, loans and grants. The common types of federal loans are Stafford loans and military/ROTC plans.

Most of the private loans given out are Citibank and Sallie Mae Signature student loans. Most of these loans are unsecured in nature and charge a much higher percentage of interest rates as compared with the federal loans.

Students normally end up with a combination of federal and private loans. When you decide to consolidate your loans do not club your federal and private loans together, you will end up paying a higher rate of interest. As a thumb rule consolidate your federal loans first.

You may wonder why you need to consolidate your student loans. Here is why:

?Paying multiple installments can be a pain as it becomes difficult to keep track of them. After consolidation you end up paying a single installment.

?On an average the rate of interest also comes down, thus reducing your installment amount. The cap is at 8.25% so even if the interest rates go up your payments won't.

?They are also tax deductible.

You need to meet three conditions in order to qualify for consolidation of federal loans.

?You should no longer be enrolled in any school.

?You should be in the grace period or must have started to repay the loans and

?Your loans should amount to a minimum of $10,000.

?Some of the student loan consolidation plans offer a cash back scheme on consolidation.

?Some plans also offer to reduce your rate of interest if you pay your installments on time for a period of 48 months.

?You may even get a reduced rate of interest if you use automated debit facilities to repay your loan.

?A smaller installment every month also helps your credibility positively for other loans

There are two things that you should keep in mind:

?Consolidate your loans at current rate and hope that the interest rates don't fall.

?Students in grace period keep in mind that once your loans are consolidated you will need to start repaying immediately

Consolidation of your student loans helps you with the repayment of loan at better rates and also helps to improve your credibility.