You graduated from college or graduate school and now you are finding it increasingly difficult repaying your private and federal student loans. There are a few options which you can take. Student loan consolidation is the option we will be discussing here. Before proceeding and to avoid any misunderstanding we will provide a summary of what student loan consolidation means.

Student Loan Consolidation is when a former student opts to merge all of his loans together. Grouping multiple student loans means that you will be dealing with one lender. You won't have to deal with making individual monthly payments. All of your student loans will be grouped together and you will make a single monthly payment to a single lender. The provisions of a consolidated student loan differs from ordinary loans in several ways. Aside from paying your loan back to a single financial institution, you will also have to pay back your loan at a fixed interest rate. There are pros and cons with pay back a loan at fixed interest rate and we'll discuss that later on. Consolidated student loans are also usually lengthier than most loans because the lender encourages payments over many years and sometimes as much as 15 years. The low monthly payments might appear attractive to you but you will ultimately be paying more interest and therefore more money to the lender. This is the main reason why lenders insist on payments spread over many years. It might assist the borrower in the short term especially during hard economic times. But the lender will benefit the most because total fiscal number of the loan will be much more than paying loans individually.

Why Consolidate Your Student Loans?

There are many reasons why former students consolidate graduate students loans and federal loans as well. The main reason is that multiple loans can be a hassle and burdensome. And many times people lose their jobs and find it almost impossible to payback the consolidating student loans in a timely manner. If this is your predicament then you need to sit down with your account and crunch your numbers.

The Pros Of Consolidating Student Loans

• The main benefit is a reprieve from having to pay multiple loans that you simply can not afford on a monthly basis. Also repaying back the loan to student loan consolidators instead of multiple financial institution is less stressful and not as overwhelming as paying several lenders.
• The student loan consolidation rate could also be greatly beneficial as well. This however will be determined by the going interest rates. The rule of thumb I go by is that if interest rate is low then I would definitely consolidate my student loans. You should you the opposite if the current interest rates are high and are speculated to drop even by a basis point.

• Student loan consolidation also means that you will be paying lower monthly payments. This is beneficial if you don't have enough money to repay your current loans.

The Cons Of Consolidating Student Loans

• You will end up paying more money because consolidation extends the life of the loan. You will pay less money a month but for longer amount of time and you'll eventually pay more money in the long term. The rule of thumb here is to avoid consolidating your school loans if you have already paid two thirds of the full loans.
  
• Consolidating federal student loans in a private loan may relinquish you of some rights. This includes right to forbearance, eligibility to apply for loan forgiveness and to defer payments.
• New loans might not be worthwhile if you intend on save money on a lower interest rate. This is due to federal loans having a fixed rate interest rate after July 1, 2006.

Eligibility For Student Loan Consolidation.

Most federal loans including FFELP, Stafford, SLS, PLUS, FISL, HEAL, HPSL, NSL are generally granted approval. Private student loans can also be consolidated if you have a favorable credit score or considerable collateral. One of you first options is ask one of your current lenders if they'll consolidate your loans. This will help facilitate matters for you, if you don't have a qualifying credit score you can use a co-signer. Using a co-signer who has a great credit score may also beneficial as you may be given a lower or preferred interest rate.

Conclusion

Consolidating student loans requires careful thought and especially foresight. If you are in need of consolidating student loans then you might not have any other option. If however you are close to paying of you loans then patience will be worthwhile. Factoring the present interest rate and what is speculated to be the future interest is also important. You can end up paying much more money if you commit to a consolidated student loan are unfavorable terms and unfavorable repayment plan. I hope this how to consolidate student loans dummies guide was helpful. I simplified as much as possible but even so before making any decision sit down with an account or loan expert and go over any questions you may have.