Federal Student Loan Consolidation
Consolidate Your Federal Student Loans
Many students with multiple federal student loans have been very excited about Federal Student Loan Consolidation. Just what is Federal Student Loan Consolidation, and why should you consider it?
You have achieved your goal of college graduation, and now you are faced with the inevitable: repaying your (Federal) Student Loan. Often it's not just one loan looming over your head, but several. What is the best way to pay them off? Firms like FederalConsolidation.org and Next Student can get you started.
Federal Student Loan Consolidation allows you to combine your existing eligible federal student loans into a single loan. When you apply for a Federal Consolidation Loan, you are taking out a new loan to pay off all or a portion of your original eligible federal student loans. This loan has a fixed interest rate and a repayment term of up to 30 years, depending on the total amount of your student loan debt. Consolidating can offer the same interest rate on the same amount of money, but with a longer repayment period, lowering your monthly payments. With no prepayment penalties, the borrower can pay back the loan at their own pace, yet still have a longer term if needed. And consolidation can decrease payments up to 60%, as extra monies paid on the loan go towards the principal.
Another reason to consider student loan consolidation is to lock in your interest rate. The rates were reset on May 30th, and the rate increase was about .92%. By next July, when they'll go up again, who knows how high those rates will be.
There are several repayment plans to choose from:
1. Standard Pay plans allows you to pay a standard amount each month throughout the life of your loan. All payments include both interest and principal. This plan has the highest monthly payment, but costs less in terms of interest paid.
2. Extended payment plans have payments that are less than Standard Pay, yet extended for periods of 12 to 30 years.
3. Graduated repayment requires initial lower monthly payments that increase later on. Early payments include interest only, and as the principal is included in the repyament plan, the monthly payment increases. Interest cost is higher under this plan.
4. Income based plans base your payments on your total expected monthly income. These rates are adjusted every year or two, and depend on your current earnings and family size.
Consolidation loans may not be in the best interest of everyone, mainly due to more interest paid over the course of the loan. Consider your situation and all the possibilities so that you can make the best decision for your future.
Also check out our Basic Guide to Consolidating Student Loans.
Finance companies benefit their clients with loans and credit card operations. Students can get advantage through student loan or student credit card packages where as car loans are also offered by leading financing companies.