If you are burdened with several of them, you should consolidate all your student loans to fix your finances.
Consolidate student loans and get relief
Many students have a number of student loans, necessitated by their years of studying that requires a considerable amount of spending. In such cases, the student will have to pay different interest rates for different loans which, when added, could well turn out to be unaffordable. Worse still, he/she may have to repay all the loans at the same time. However, if he/she decide to consolidate his/her student loans, it will become much easier and more convenient for repaying the loans.
What is student loan consolidation
When one decides to consolidate his/her student loans, all of them are consolidated into a single compounded sum. This is achieved through an agreement with one creditor who agrees to pay off all his/her debts. The amount the new creditor pays becomes a new loan for the student that he/she needs to pay off to his/her new lender.
Benefits if you consolidate student loans
Student loan consolidation has a number of benefits. First, the interest rates could be reduced as there would be one single amount on which interest will be fixed. Once you consolidate your student loans, you will have to deal with a single loan and make only a single payment each month. This will be much more convenient than handling several different loans with different payment dates every month. By loan consolidation, you can also extend the maturity date of some of the loans.
Types of student loan consolidation
Student loan consolidation can be classified into two categories: federal loan consolidation and private loan consolidation. In federal loan consolidation, all the debts of a student are taken over by a consolidation company or by the Department of Education. In this case, the loans can only correspond to federal institutions.
If you decide to go for private loan consolidation, you deal directly with a lending company which will present you with an offer for consolidating your private loans. Before you consolidate your student loans in this way, keep it in mind that the interest rate is higher than the federal type. Even if your monthly quotas are lower, you still need to pay a higher consolidation rate, and that too for a longer period.
Federal loan consolidation does not charge you any extra fees, but companies offering private loan consolidation charge an additional fee for their services. Even then, circumstances leave a number of students with only this expensive option for repaying their loans.