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Are you in favor of student loan consolidation? If yes, tell me everything about student loan consolidation?

Updated on July 6, 2011

Yes I am in favor of student loan consolidation as there are many students around the world who are suffocating under tens of thousands of debts and loans to pay and they need to convert all their loans to one single place in order to live a better life and of course complete their studies without thinking of paying to too many lenders at the same time. Frankly speaking, I have not opted for a student consolidation loan when I was studying as at that time my parents had managed that well but what about students who have to do everything on their own, complete their studies, manage their daily needs, and finance, and everything in life. Here in India, the need for student loans comes up when a student has to take a loan from a bank or some institution for higher education or studying abroad when the fees is in lacks of rupees, for example, 5 lacks or above. I have a friend in US who has taken some student loans and I have talked to him on the phone today as he is also considering to opt in for a loan consolidation.

Are you in favor of student loan consolidation?

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Student loan consolidation is helpful but one should think on many factors and points before coming to a decision

Are you in student loan debt?
Are you in student loan debt?
You can opt for a Federal Loan Consolidation for your higher studies.
You can opt for a Federal Loan Consolidation for your higher studies.
You got a degree, now what? You think you are in debt of many student loans, convert them in one and be stress free.
You got a degree, now what? You think you are in debt of many student loans, convert them in one and be stress free.

Whereas, the trend of student loan consolidation is new in India and the student loan product is emerging on a fast pace over here also. So lets talk about what is student loan consolidation and how it works in US? We will also talk about the student loan consolidation interest rates and the most important factor that when and how you should consolidate your loan.

What are student loans?

Student loans are offered especially to students to help in the payments of their costs of career-oriented education. These loans are a great source of financial help for these students.

What is student loan consolidation?

Sometimes, when students leave their college, they have a burden of huge debts on their shoulders as they have many other loans also from different lenders. Here comes the need of loan consolidation. In simple words consolidation means bundling or joining, so student loan consolidation means converting all your (student) loans into one single student loan with a single bank and repayment plan. Loan consolidation is similar to refinancing a home loan or house mortgage.

When a student consolidates his/her loans, the balance of their existing loans is paid off and the total balance rolls-over into a single consolidated loan. At the end, you will have only one loan to pay off which makes it easier for you, and you do not have to sign checks for different lenders. You must also know that parents of these students can also consolidate loans.

Benefits of student loan consolidation:

  1. You will have a fixed period of loan with lower interest rates in which way you will save much more money than your existing loans.
  2. Loan consolidation will lowers your equated monthly installment.
  3. All your student loan payments will be converted into one monthly installment.
  4. Some banks or financial institutions offer consolidated loans with flexible repayment options which means you can pay anytime in between the tenure of your loans with any extra prepayment fees, charges, or penalties.

Why you should consolidate all your student loans?

A student should consider a loan consolidation if he/she is getting lower interest rates than their existing loans. Some students also find trouble making payments to different lenders. For those students, loan consolidation is highly beneficial. If you find out that you are close to paying off all your existing student loans, do not go for a student loan consolidation as you may be in a loss, as for every loan, there is the same sequence. For example, if you have taken a loan of 120000 rupees for 10 years, the interest part of your monthly installment will be maximum in the first 5 years and will lower down in the ensuing years. The principal part of the installment you are paying will be very low in the starting year and is high at the end year. So it is highly advisable that do not go for any loan consolidation if you know you are very near to paying on all your debts.

What is the interest rate for a student loan consolidation?

Interest rates for a student loan consolidation is usually calculated by taking an average of the interest rates of all your existing student loans which you have submitted for consolidation and then it will be rounded up to the next 1/8th of 1%.

To find out the exact interest rate for your student loan consolidation, visit www.loanconsolidation.ed.gov

How much money a student can save by opting for a loan consolidation?

This totally depends on the tenure a student is going to opt for in order to pay off his consolidated loan. If a person will take a shorter period of paying off the loan, he will save more. If he will opt for a longer period, interest will be high and savings are less.

Different types of loans a student can consolidate.

  1. Direct plus loans & federal plus loans.
  2. Federal unsubsidized Stafford loans.
  3. Federal subsidized loans.
  4. Direct unsubsidized & subsidized loans.
  5. Guaranteed student loans.
  6. Federal Perkins Loans.
  7. Federal consolidation Loans.
  8. Direct consolidation Loans.
  9. Federal insured student loans.
  10. Auxiliary loans to assist students.
  11. Federal supplemental loans for students.
  12. National defence student loans.
  13. Health or medical education assistance loans.
  14. Health Professional Students loans.
  15. Loans for disadvantaged students.
  16. Loans for nursing students.

How and where to get a consolidated loan for students?

You can get consolidated loans via any financial institution or bank, which participate in Federal Family Education Loan Program. You can also get these loans directly from United States Department of Education. Most of the times, the loan's T&Cs are same.

So friends, now I think you will also be in favor of student loan consolidation like me, as loan consolidation helps in different ways and turns the pressure and stress off of your mind and helps you in studying properly.

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