Education Articles from College Matching Service

Why should I consolidate?

I myself have education loans, so I started looking into the possibility of consolidating these loans to lower my interest rate and reduce multiple payments into a single payment, for simplicity.

The purpose of consolidation is to save money and make things easier on yourself. When you first took out the loan for your education, you may have received an unfavorable rate on the loan. With the current economic status, the government is taking strides to help students with their education loans.

In my research, I found out these important facts about consolidation:

• You cannot consolidate a private loan into a federal loan. That is to stay, if you have a loan through a bank institution such as Citibank, you cannot consolidate it into your federal student loan (which almost always has a far lower interest rate and much more favorable payment terms).
• You can consolidate a private loan and a federal loan. Right now there are huge opportunities that the Department of Education has offered to past and current students that will reduce interest rates and limit monthly payments based on income.
• You can only consolidate an education loan during the grade period, which is generally right after graduation for six months, or during repayment.
• Generally to consolidate a loan a minimum loan balance must be met. These generally average around $5,000.

Flexible Repayment Terms

One of the biggest reasons people consolidate their loans is to restructure their payment plan. For any number of reasons a loan holder may be interested in adjusting their payment terms to either extend the length of their payment terms, and thus often lowering their payment. A federal loan typically has a 10 year agreement. By consolidating the loan, that length can be extended for between 12-30 years.

By extending a loan, you often will lower your monthly payment, but by extending the term of the loan, you will pay a significantly more interest on the loan.

It is generally recommended to agree to the lowest number of years because it will save you money.

Does it cost anything to consolidate?

No, generally there is no cost to consolidate besides the chance that the interest rate will be increased, which as discussed, will increase the amount of money that will need to be paid for the loan (as compared to before the consolidation).

Occasionally depending on the type of consolidation, a fee may be incurred. Almost always this fee is added to the loan or deducted from the disbursement check. If you find yourself in a situation where any type of upfront fee is being requested from you, there is a high probability that you are involved in some kind of scam.

Here are a few more consolidation resources to help:

• How To Repay Your Student Loan
• Student Loan Consolidation
• Reduced Student Loan Payments
• Direct Consolidation Loans
• Department of Education

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