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Student loan consolidation guide 101
The constantly escalating fees as well as the competition in the field of higher education have made the life of a student burdened by debt. Most of the students are financially not capable of bearing the enormous expenses of their college life and as a result of this they have to acquire numerous loans, such as, education loan, credit card loan etc. These loans definitely help them for a while but when the time to pay them back arrives they can become a real nuisance for these students. Their numerous monthly installments and high interest rates can make many students lose their sleep and get distracted from their career path. All these problems and more can be avoided if the help of a Student Loan Consolidation is secured.
The basic idea behind the Student Loan Consolidation is of restructuring the finances of those students who have over their student life accumulated numerous loans and are now finding it difficult to pay them back. It helps them by combining all their previous loans under a single head. A consolidated loan is beneficial for students as compared to various small loans because of various reasons. By consolidating all the loans a student ensures that he has to pay towards a single loan each month. Thus, he becomes answerable to only one creditor which is a very mentally satisfying factor for him. Moreover, he saves his time and effort as it is much easier to handle one payment monthly than several separate payments. Thus, after opting for a student loan consolidation, students can concentrate more on their studies and career rather than thinking about loans. Secondly, a consolidated student loan carries a lower interest rate than the various other student loans. Moreover when a student opts for a consolidated loan he has to pay only one interest rate, not several different rates. Also, a consolidated loan offers more flexible repayment options than the other loans. This type of loan is also generally free of any kind of prepayment penalty.
Another plus point of Student Loan Consolidation is its easy availability. These services can be easily obtained both online and offline. Moreover, the companies offering these services dont perform extensive credit checks. Also, no collaterals are asked for taking this loan. Some companies even offer rate reductions. For instance, some of them reduce the interest rate by 1% if a student makes all his payments on time for two years. Thus, before opting for a student loan consolidation a student should do his homework and carry out a survey of what all the companies are offering him, to get the best deal.
Hence, Student Loan Consolidation is beneficial for the students in all senses. So, if a student has accumulated loans in excess of $7500, the best way to manage them is by consolidating them. This would free up the cash flow with reduced monthly payments and allow the students to concentrate on their career by being satisfied both financially and psychologically.
Guide to Private Student Loan Consolidation
Borrowing may be your only option to pay for your college education if you are not eligible for grants and don’t qualify for scholarships. The process of acquiring these loans can be simple enough that you allow the repayment period to begin before you calculate what that monthly amount might be. If your starting salary is less than you anticipated, you may need to consider private student loan consolidation to put your loan into a more manageable format.
Private Student Education Loans
Private education loan consolidation means private loans cannot be comingled with Federal education loans. If you borrowed money with a private education loan, you will need a private education loan consolidation. By doing this you will reset the terms of the loan which may reduce your monthly payments. Usually the interest is not reduced. But if your credit score has improved since you originally applied for the first loan, you may qualify for a reduced interest rate. This may be the case now that you have graduated and gotten a job in your chose profession. You may now be a doctor making a good income and if you’ve been paying your bills on time your scores may have improved 100 points or more, which would definitely qualify you for a better credit score and lower interest rate.
Check with your existing bank to see if your current loans can be consolidated into a lower interest rate loan before you take it to another bank. They may be willing to help you rather than lose your business. If they are not helpful, shop around and find another lender who is willing to give you a private education loan consolidation. When shopping for a private student loan consolidation check to see if the loan is fixed or variable. What are the fees, origination fees, etc? And are there prepayment penalties? You should be able to pay an extra amount that is applied to your balance after collection costs; late charges outstanding interest and principal have been deducted from the payment. Any additional money left is considered prepayment and will be applied to the loan balance. There should be no extra fees associated with prepayment in the original loan. You will have to determine if the private student loan consolidation has fees of this nature.
Private education loan Consolidation Lenders
The Higher Education Act of 1965, The Higher Education Opportunity Act of 2008 and the amended Truth in Lending Act banned fees or penalties for early repayment of private education loans. The competitive institution did not charge prepayment penalties to keep the playing field even for all private lenders. Prepayment can provide a significant savings for the student. The total interest paid can be reduced by the extra payments being applied to the balance first and then the interest, ultimately saving thousands of dollars over the lifetime of a private student loan consolidation.
An EdSucceed Private student loan Consolidation through cuStudentLoans.org will provide loan consolidation for undergraduate students with debt of $7500 to $100,000 and graduate degree recipients with debt of up to $150,000 a 15-year loan. They have a 1.00% origination fee and a variable rate based on prime plus 1.5% to prime plus 4%. Your rate is based on credit and whether or not you select ACH payments. If you have a cosigner, you can release them after the first 12 year of on-time payments if other credit criteria are satisfied.
The student loan Network offers private college loan consolidation for a minimum of $10,000 to a maximum of $300,000. The repayment term ranges from 20-year for $40,000 or less to 30-year for above $40,000. The interest rate is based on 3-month LIBOR plus 5% to 3-month LIBOR plus 8.5%. The origination fee is also a range of 1% to 5%. There are no prepayment penalties and the cosigner is released after 4 years of timely payments and is based on the primary borrower’s credit improving.
Wells Fargo offers private education loan consolidation. They will consolidate a minimum of $5000 and up to $40,000 or up to $100,000 depending on the borrower’s credit. A 15-year term is provided with a variable rate. The interest ranges from prime plus 1% to prime plus 5.75%. The base rate is 3.25%. There is no origination fee associated with this loan. The rate is reduced.5% for automatic debit payments and the rate is reduced further for making 48 payments on time consecutively.
Currently, both Chase and Next Student have temporarily suspended their private student loan consolidation programs. Private student loan consolidations that are variable rate should be compared to a home equity loan with a fixed rate. If the comparison makes a home equity loan more attractive, and you own a home with enough equity in it to finance such a maneuver, this may be a better option than a variable rate loan.
Private Student College Loans And Federal College Loans
The primary difference in private student loan consolidation and federal loan consolidation is private loan rates are higher than federal loans even in consolidation. Federal loans and private loans cannot be mixed into the same consolidation loan. A loan that mixes several loans together often reduces the rate of one or two of the loans and reduces the payment giving the borrower more years to pay. This cannot be done when the loans come from different sources. Guaranteed Student education loans or federal loans with much lower interest rates cannot be mixed with private non-guaranteed loans with much higher interest rates in a private education loan consolidation.
The Consequences Of Default
Private college loan consolidation is there to provide more manageable debt repayments, preventing default or reducing incidences of default. Defaulting on a student loan could result in the IRS offsetting or keeping your federal or state tax refunds and wage garnishments. If you are a federal employee, they can offset 15% of your pay to repay Education loans. You may have to pay additional collection costs, legal action may be taken against you and the credit bureaus will be notified and your credit rating will suffer. Bankruptcy is no longer an option. Student education loans cannot be included in a bankruptcy filing. The only option for reducing payments of a private education loan is a private college loan consolidation. Your total loan term may be extended, lessening your monthly payments.