Consolidation Of Student Loans

Consolidation of student loans can be the ideal solution when one requires help to manage their debt. You may have to make several payments but by applying for a Federal Consolidation students loans, you can make just one payment in a month. Your lender combines your different loans into one single loan. Choosing to consolidate student loans requires interest payment at a fixed rate, determined by the average of your loans up to the nearest .125%. Direct loan electronic payments may further lower interest rate. Student loans debt being unlikely to be the largest debt owed by a person may be best managed in consolidated student loans.

Reasons to consolidate with the federal direct loan program:

--You pay according to your income

--More repayment options than ever before

--Freedom to change repayment play any time

--Everything in one monthly statement

--Qualifying despite being in default

--Qualifying despite still being in school

You Can Pay Less Each Month

The number of federal student loans to repay doesn't matter, for consolidating into a single account. You can consolidate one or more FFEL or direct student loans including parents with PLUS loans into a direct loan account. Consolidating student loans combines better repayment terms, convenience, financial viability and competitive interest rates. With the option of repaying over a longer time period, your monthly payments are significantly reduced even if it means paying a larger amount eventually.

Direct consolidation student loans have interest rates that vary and alter on July 1st annually. 8.25% is the maximum the interest rate for student borrowers with 9% being the upper limit for parents with PLUS loans. Those without direct loan at the moment are required to check with a Federal Family Education Loan (FFEL) program lender for details on consolidation student programs and new repayment terms more in proportion to income.

At least one loan needs to be under the direct loan or FFEL programs. To help your decision, a few considerations need to be made. 

The interest rates for each loan: A lower direct consolidation student loans rate than current loans can make it worthwhile. The variable interest rate may fluctuate but never exceeds 8.25% for students and 9% for parents with PLUS loans.

Affordability every month: If monthly payments are a problem, deferment and forbearance options exhausted and face default, consolidation can help. 

Extent of term duration: As with home mortgage and car loans, extending duration means a higher amount to repay. 

Number of payments remaining on loans: If you are in the final stages of your student loans repayment, it may not be worthwhile to consolidate or extend payments further.

Tips for student loans repayment

Student loans consolidation is commonly used to manage debts. Consolidating student loans usually saves money but though monthly payments are reduced, the interest is likely to be increased. This is why it's better to try and pay off as much of the student loans as possible at the earliest. Increasing monthly payments makes this possible. Remember certain deferment programs are also available. For example economic hardship can cause reduction in consolidate student loans. Default is taken as failed payments on student loans as per the promissory note, the binding legal document that was signed at the time of taking the loan. This violation can invite action by your school, financial institute behind the loan, loan guarantor and federal government to recover the amount.

There are a few consequences of default: 

--National credit bureaus could be notified and thus harm your credit rating for buying a car or house.

--Additional federal student aid is denied in case you return to school

--Loan payments can be deducted from paycheck

--State and federal income tax refunds may be withheld and used toward the dues.

--Late fees and collection costs are added to the due amount

--You can be sued.

Therefore loan default is highly undesirable. In case it does occur, find out the options and consider them before making a decision.