If you are one of the millions of Americans who have had to borrow to pay for college, you know it’s not easy to keep track of the different monthly installments, interest rates and duration of loans – and much less, is heavy taxed. To help students put together their separate loans in a single loan, there is a service called student loan consolidation. The borrower gets a monthly payment which is usually less than paying each loan separately. Read the following discussion on how to consolidate your loans and lead you to paying your debts.
1 Evaluate the risks of consolidating your debt. There are risks to consolidating your debt, which means that consolidation may not be appropriate for everyone. Carefully weigh the pros and cons of consolidating a student loan debt before making any decision:
- those before :
- Simplify Your Payments Three, five or even seven different loans can be reduced to a single loan with a single interest rate payment.
- Make use of income based payments. This is a clever step for people with lower wages because monthly payments have a limitation on a certain percentage of their basic salary. When your salary rises, the payments go up, and when your salary decreases, the payments also become.
- Change at a fixed interest rate. This means that your interest rate remains the same for the duration of the loan.
- the disadvantages :
- Most likely, you have to pay more while your loan lasts. You may have lower monthly payments, but the number of payments and the total interest rate will increase.
- You will lose all the benefits for borrowers associated with the loans separately. Benefits may include interest rate discount, principal payment or cancellation benefits.
- Once you consolidate, you can’t retract. There is no button to remove a consolidation. Once you decide to consolidate, the original loans are paid. You can fast with a not-so-good loan.
- The interest rate can be high. The federal interest rate for consolidated loans has a limit or a cap of 8.25%. The interest rate may not be so high, but it pays 25.25% for 25 years.
- 2 Find out if you have any private loan. The consolidation of federal student debt cannot include private loans. This means that if you have a combination of federal and private debt, at best you can consolidate your loans into two loans. If you only have one federal debt or if you only have a private debt, you can consolidate into a loan.
- 3 Find out what kind of federal loans can be consolidated. Most, but not all, federal loans can be consolidated. The following can be consolidated under the direct loan consolidation program:
- Direct loans with subsidy and without subsidy
- Federal subsidized Stafford loans and without subsidy
- Direct PLUS loans
- PLUS Federal Family Education Loan Program (FFEL) Acronym in English
- Additional loans for students
- Federal Perkins Loans
- Federal Nursing Loans
- Help loans for medical education
- 4 Compare your monthly payments and current interest rates with possible monthly payments and possible interest rates after consolidation. Consolidating your student loans is an important financial decision, so inquire about it will help in the long run: less complications, more money savings, or less time with debt.
- Talk to your loan managers to find out what your current monthly payments are. If you don’t know who is in charge of your loan, watch it online. Add all your monthly payments and interest payments, and find out how long you expect the loans to last.
- Estimate your monthly payments and weighted interest rate payments through the Direct Loan Consolidation Center or online.
- Compare the two amounts. For you, is the convenience of appreciating a monthly payment raising the interest rate? Is it worth paying lower monthly installments over a longer period? There are no right or wrong answers here. The answer depends on your situation.
- 5 Review the admission requirements. For consolidating federal student loans, you must meet a range of qualification requirements:
- You need at least one direct loan or loan from the FFEL program that is currently in a grace period or you pay.
- You need to consolidate loans that you owe with their loan administrators before, and you must pay the offender loans under the Plan Except Income Payment Plan or Revenue Based Repayment Plan.
- You cannot consolidate the already consolidated loans, with a few exceptions. In most cases, you cannot consolidate a loan that has already been consolidated. If your consolidated debt is an exception, consult the administrator of your existing consolidation.
- 6 Call or send a message by email to a student loan consolidation company. If you consolidate a federal student loan debt, you can go to the website loanconsolidation.ed.gov/ (in English) and see if you are eligible. If you are going to consolidate the debts of private student loans, Forbes recommends Chase, NextStudent, Student Loan Network or Wells Fargo as administrators of consolidation in the US.
- 7 Enter the loan consolidation application of the loan company. Please do not forget any information as this may delay the approval of your application. Make sure you have the following information to complete your application:
- Your current address
- Social Security Number
- Names, addresses and telephone numbers of two personal references
- Information on monthly housing costs
- Monthly income and expenses information
- Estimated amount of loan to be consolidated
- Account numbers of the loans to be consolidated
- Names and addresses of loan officers (you can find them in your monthly statement)
- Outstanding balance of the loan / estimated amount payable
- 8 Waiting for approval of your consolidation loan. Make sure you keep the payments of your previous loans until you receive a confirmation letter from your loan consolidation company to verify that all previous loans have been paid in full.
- Interest paid on student loans can be deductible when paying taxes. Go with your accountant.
- Many companies reduce your interest rate by a small amount if you sign that payments are automatically made from your account.
- Federal student loans and private funds may not be consolidated. You can consolidate several private or multiple federal loans. They can’t be mixed.
- Some loan consolidation companies may have a minimum or maximum amount of loans that they can consolidate.
- Make sure you continue to pay your previous loans until you receive confirmation from the consolidation company that the loans have been paid in full. If you don’t make a payment, it can negatively affect your credit.