What Is the Best Way to Consolidate Student Loans

Everyone describes the act of consolidating school loans slightly differently. Some say consolidation cuts your monthly payments. Others prefer the interest rate decrease after 36 months more useful. Finally, others enjoy only paying one bill each month.

Looking at federal loan consolidation, this is a fixed rate-refinancing program that combines all of your existing federal loans into one new loan. Examples of potential loans you can consolidate include Stafford, Parent PLUS, Perkins, and Direct. In terms of saving money, school loan consolidation can lower monthly payments up to 53 percent.

Alternatively, private student loan consolidation is a separate program for refinancing all nonfederal school related debt. This method of consolidation offers the convenience of single, lower monthly payment for an individual’s private loans.

Legislative has recently been passed regarding federal loans. In-school consolidation is no longer an option. You will need to be out of school to be eligible to consolidate.

Next, you’re no longer required to have multiple lenders. And, you are no longer able to consolidate your loans with your spouses’ loans. A federal consolidation loan is a governmentally set term and will be the same regardless of who your lender is.

Many people consolidate with the government because they assume they will have more benefits than other programs. The reality is that the benefits of the loan will be the same regardless of whom the loan is through. The primary conclusion, or the “financially smart” option is not going to be the same for each student.

It is a factor of how you plan to repay your debt and what is most important to you at this in your life. It also depends on where you live. Consider all options, most states offer many different types of consolidation programs.

We now look at the changes and considerations for private loan consolidation. First, you cannot consolidate private loans until you’re out of school and beginning repayment. Next, you cannot consolidate private loans with federal loans.

Unlike federal consolidations, in the vast majority of instances, consolidation private loans will leave you with a variable rate loan, not a fixed interest rate. As mentioned, there are only a few companies that don’t have stipulations in order for you to use their consolidation refinance program.

You will want to shop closely the loans rates and terms because the lender, not the government sets the interest rates (most are linked to the Prime Rate.) Perhaps the most important question to ask is “how is your credit now”? Private loans are credit-based and if in any way you have had problems along the way you should reconsider.