Student Consolidation Loans

I think you are a college student. Approaching graduation day or a recent college graduate? I’m sure you have been contacted by student loan consolidation services. Aha, now you have a question- is federal loan consolidation right for you?



Consolidation is the combination of several actions into one where as the debt consolidation involves- “taking out one loan to pay off many others”. This debt consolidation is done to secure a lower interest rate or to secure a fixed interest rate or for the ease of servicing only one loan.

Debt consolidation simply involves from a number of unsecured loans into another unsecured loan. But more often debt consolidation involves a secured loan against an asset, most commonly a house that serves as collateral. This collateralization of the loan allows a lower interest rate than without collateralization. Because by collateralizing, the asset (house) owner agrees to allow the forced sale (also called foreclosure) of the asset to pay back the loan. As the risk to the lender is reduced, the interest rate offered is lower.

Student Debt Solution Can be Student Consolidation Loans

First of all you have to have a clear idea about what is student loan consolidation? This is simply means that if you have more than one U.S. government loan during your time as a college student, you can combine all of them into one.

Student Loan Consolidation also called Student Consolidation Loan will reduce your monthly payment burden. Student Consolidation Loan combines several student or parent loans into one bigger loan from a single lender. This is then used to pay off the balances on the other loans. Consolidation loans are available for most federal loans, including - Perkins, Health Professional Student Loans, FFELP (Stafford, PLUS and SLS), FISL, NSL, HEAL, Guaranteed Student Loans and Direct loans.

In the United States, federal student loans are guaranteed by the U.S. government. Depending on what type of federal student loan the borrower holds, existing loans are purchased and closed by a loan consolidation company or by the Department of Education. Interest rates in a federal student loan consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year. Student loan rates fluctuate from 4.70% to a maximum of 8.25% for federal Stafford loans, 9% for PLUS loans.


How Student Consolidation Loans Works

Depending on the total education debt amount, Student Consolidation Loan allows you to extend your repayment period from the standard 10 years to up to 30 years.

Less than $7,500= 10 years
$7,500 to $10,000= 12 years
$10,000 to $20,000=15 years
$20,000 to $40,000= 20 years
$40,000 to $60,000= 25 years and
$60,000 and above=30 years

But you have to remember that the total amount of interest paid is increased by extending the repayment period. This is simply loan repayment by combining several Federal education loans into one new loan.

Read the Advantages and Disadvantages of Consolidating U.S. Government Loans

Source- Jupitar's Hub