If you want to avoid this situation in future, you should apply for a Student Loan Consolidation, which would allow you to merge all your current loans into a single loan with lower interest rates and a very flexible repayment plan. However, before applying for it, there are certain important facts that you should be aware of and a few guidelines you should follow:
1) Is this Option Right For You?:
You should opt for loan consolidation if and only if you are finding it difficult to make monthly repayments of your current loans in time. In case the total balance amount left on all your loans is very less and you are close to paying it off soon, do not opt for consolidation as it might not be worth it at all.
2) Interest Rates:
The interest rate for the consolidated loan is estimated by taking out the average of the interest rate of all your current loans and then rounding it up to the next 1/8th of a percent. The maximum interest rate is 8.25 percent. Also, the interest rate is fixed and does not increase with time. You can also use online mortgage calculators to calculate your interest rate.
3) Repayment Amount:
- If you wish to reduce your monthly repayment amount and save big on consolidating your loans, it is necessary to extend the repayment duration of the loan. By extending your repayment plan, you can even reduce your current monthly payments by 54%.
- Usually, the repayment period is 10 years, but it can be extended to as long as 30 years. However, this largely depends on the balance amount you are consolidating.
- Although extending the repayment term is beneficial, you will have to pay more in interest as you would take a little longer to repay the entire loan. However, the good news here is that no pre-payment penalties are charged in case you choose to pay off the loan early.
4) Eligibility:
Following criteria should be met to meet the eligibility requirements for loan consolidation:
- Should be having loans from at least two lenders
- Your current student loans have not been consolidated earlier
- The total balance loan amount on all loans to be consolidated should exceed $7,500
- You should be in your six-month grace period of your loans after your graduation or you should have started making the repayments.
5) Loan Approval Process:
The entire loan consolidation process usually takes a month. Sometimes, you might have to even wait for more than 45 days. Therefore, it is better to plan for it accordingly.
6) Types of Loans that can be Consolidated:
- Direct Subsidized and Unsubsidized Loans
- Federal Subsidized and Unsubsidized Federal Stafford Loans
- Direct PLUS Loans and Federal PLUS Loans
- Direct Consolidation Loans and Federal Consolidation Loans
- Guaranteed Student Loans
- Federal Insured Student Loans
- Federal Supplemental Loans for Students
- Auxiliary Loans to Assist Students
- Federal Perkins Loans
- National Direct Student Loans
- National Defense Student Loans
- Health Education Assistance Loans
- Health Professions Student Loans
- Loans for Disadvantaged Students
- Nursing Student Loans
7) Choosing the Lender:
- If all your current loans have been acquired from a single lender, it is better to consolidate with the same lender.
- Alternatively, you can get the student loan consolidation either through the U.S. Department of Education or through a financial service that is registered in the Federal Family Education Loan Program.
Thus, with the help of the above facts and guidelines, you can get the best deal on a student loan consolidation at the right time from the right lender. Consolidating education loans is a simple way to get relief from the overwhelming debts, and should definitely be considered to ensure a secured future.
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