College Loan Consolidation - The Basics

When you consolidate your college debt, you simplycan really appreciate the manageability of a
combine several of your student or parent loansconsolidated loan when they have multiply loans to
together into one loan from a single lender. As amanage. Consolidating all the loans into one makes
result, you end up with a single manageable monthlythe complexity of multiple loans disappear leaving a
repayment instead of making several monthlyborrower with a single monthly repayment.
repayments at once.Alternative Repayment Plans - When you consolidate
College loan consolidation programs are differentyour college loans, you could potentially take advance
from ordinary loans and bring with them a number ofof alternative repayment plans which usually become
important benefits:available if the total loan balance is higher. For
- Your credit score will not be analysedexample, instead of paying back your college
- There is no maximum amount availableconsolidation loan in 10 years, you could consider
- You can potentially postpone repaymentextending the repayment plan to 20 years which will
- Debts are forgiven at the death of all borrowerssubstantially reduce your monthly repayments. In
- Interest paid on college loans could be taxsome cases, monthly repayments can go down by
deductibleas much as 50%. Depending on your circumstances,
College Loan Consolidation – The Mathsextending your repayments can make the overall
The interest rate on a consolidation loan is theloan more affordable and manageable. However, bear
weighted average of the interest rates on the loansin mind that if you extend your repayments, you will
being consolidated, rounded up to the nearest 1/8 ofend up paying more interest over the lifetime of the
a percent and capped at 8.25%.loan. That been said, this option suites many
Here is a typical example:graduates that have other financial commitments and
Jenny has $7,000 worth of Perkins Loans @ 5% andcannot stretch to fully repay the loan in 10 years.
$13,000 worth of Stafford Loans @ 7.5%. WhenConsolidation resets the clock on deferments and
Jenny consolidates her loans into one, her weightedforbearances - In most cases, college loan
interest average rounded up to the nearest 1/8th ofconsolidation resets the 3-year clock on certain
a percent becomes 6.63%. Here is the actualdeferments and forbearances. As consolidation loan is
consolidation calculation: (7,000*5% +13,000*7.5%)classed as a new loan, it brings with itself its own set
7,000+13,000.of new deferments and forbearances. This factor is
When a borrower consolidates a number of loansparticularly useful for medical students who do not
with different interest rates, the consolidated interestget an in-school deferment during the internship and
rate is usually lower than the highest of their interestresidency periods.
rates, but it is also higher than the lowest of theirConsolidating while already in repayment - If you
interest rates. In most cases, if you keep to thehave loans already in repayment then consolidating
same repayment schedule for your consolidated loanyour loans earlier on could potentially lower your
as was originally set out in your un-consolidated loansmonthly repayments even if you stick to a standard
(e.g. 10 years), then the amount of interest you pay10 year plan. However, if you are close to the end of
over the lifetime of the consolidated loan will bethe repayment period on your loan, then consolidating
about the same. That been said, there are a numbermay not be the ideal solution.
of important benefits that college loan consolidationThe benefit of shopping around - If you decide to
provides that makes it a very popular financial lendingconsolidate your college loans then you can spend
option for graduates.time shopping around for the best lender who will
College Loan Consolidation – The Advantagesgive you a higher interest rate discount and better
One Simple Monthly Repayment - A college borrowerrebates on the fees.