Important Information About Student Loan Consolidation Options
There is a wealth of information about student loan consolidation in written and online media and it does pay to conduct a critical benefit analysis of the processes, new laws and changes that exist before you decide what to do. Your current income, indebtedness, possible forgiveness eligibility, future education plans and the health of your credit score are all at stake in this proposition. Therefore, going to a diversity of sources and comparing their interpretation of advantages and disadvantages of student loan consolidation is a prudent course of action.
Most student loan consolidations combine several loans for payment by one large loan and are similar to other consolidation processes like bill and mortgage consolidations. Most federal student loans are eligible for a consolidation loan as long as the loans are from one lender. Parents can also get refinancing to pay loans in a consolidation arrangement. There are also options for private student loan consolidation and they should be investigated as well, but separately since private loan interest rates are usually higher than federal student loan interest rates. It should also be noted that private loans can not be consolidated with federal student loans. Therefore, the main advantage to consolidation for private student loans is to have one monthly payment rather than several.
The advantages of consolidating federal student loans are the diversity of loan discounts offered by the different lenders on the discount list. You have to shop around for the best deal in comparison to your financial situation. Of course, many lenders on the list offer competitive discounts to encourage borrowers to consolidate with them. But, new laws enacted from 2005 forward have changed the lending market and make variety of choice more available while reducing interest rate discounts.
Borrowers on a student loan consolidation automatic direct debit payment plan with their bank should beware because on average less than 10% on average are successful with the required 36 month required on time payments to earn the extra 1% discount. Also, if you obtain another forbearance or deferment during the 36 month period you lose the added 1% discount permanently. It appears better to sign up for the more immediate discounts that you will not loose that include the discount for opening the direct debit payment plan, those that offer a reduction in the principal or a rebate on fees. Also, it is vital to get better terms about missed payments and shorter grace period forgiveness. Get the details of each discount requirement within the direct debit plan before you sign up. Be a vigilant watchdog and check the lenders website information on loan terms and changes frequently. It is wise to visit several websites that offer student consolidation loan information on student loan discounts, loopholes, hidden clauses, fine print, difficult to understand phrasing and terms, special repayment plans or extended repayment plans. Be your own best advocate and shop around to see all the advantages and disadvantages for yourself before you sign on the dotted line for the best repayment deal.