Student Loans and Consolidation

Best Options for Refinancing and Funding College Loans

Aug 7, 2009 Fleur Hupston

After all the hard work of getting a degree, indebted students may be able to better manage their debt burden by consolidating loans.

Shopping around and comparing the different repayment plans from various lenders is always a good idea because terms and rates vary between lenders and doing the research may mean a better deal.

Interest rates are down from July 2009 and those who hold federal loans with a variable interest rate will find themselves in a good position to consolidate. The rate decrease will not effect everyone, however.

Student Loan Payment Options

Standard Plan: Fixed monthly payments for up to 10 years.

Extended Plan: This plan allows the student to extend the loan over 30 years, depending on the amount of the loan.

Graduated Repayment: This option would suit a student who wants lower payments during the first few working years and then can pay higher payments when earnings increase. Different lenders have different options, for example interest only payments for the first few years followed by higher payments that include interest and the principal loan amount payments.

Income Contingent: This is an option to consider if income is low. The lender bases payments on monthly income, amount borrowed and employment status. Payment will be adjusted as the work situation improves and income increases through a career. Requirements and terms vary with each lender.

Federal Consolidation Versus Private Consolidation

Federal consolidation loans come with a fixed interest rate and follow a set federal formula. Private consolidation loans come with a market rate that may be fixed or variable. Refinancing a federal loan with a private consolidation product will more than likely result in much higher interest charges, so keep them separate where possible.

Private consolidations can be an option worth considering since the student can benefit from a longer repayment term (up to 30 years), lower monthly payment and the advantage of having only one bill to pay. The disadvantage is that the longer repayment terms can mean a greater cost over the life of the loan. even though the monthly payments will be less.

College Loan Checklist for Federal Consolidation

Correctly filled out application form,
4-digit FAFSA personal identification number,
Loan details such as servicer, disbursement date(s) and current amount owed,
A decision on which loans need to be consolidated and which don't,
A decision on which repayment plan choose, that is, standard, extended income-contingent or graduated.

Eligibility Criteria for Federal Student Loans

US citizens and eligible non citizens (permanent resident, asylum, etc.) are eligible to receive federal financial aid. International students are generally not eligible. Students who are legal citizens/eligible non citizens but whose parents are illegal immigrants may qualify for financial aid, but will likely need the assistance of a financial aid officer.

If a student is enrolled in school half-time or greater as defined by the school, he or she is not eligible for consolidation and will need to wait until falling below half time status or until graduation.

Source:

Federal Direct Consolidation Loans Information Center

The copyright of the article Student Loans and Consolidation in Mortgages/Loans is owned by Fleur Hupston. Permission to republish Student Loans and Consolidation in print or online must be granted by the author in writing.

Loans can get Students Through College	Refinancing Student Loans is Possible	Student Loans and Consolidation
Loan Consolidation Need not be Confusing	Where to Find the Best Student Loan Consolidation?