5 FAQ About Student Loan Consolidation

Student loan consolidation has great benefits, but it often looks like a complicated

process and scares people. There is nothing to be afraid of, it is actually much

simpler that you think, but to get the most of your consolidation loan you need

to know several important things.

1. How to find the best student consolidation loan rate?

According to FFELP (Federal Family Education Loan Program) guideline lenders

calculate your rate as an average of your existing loans' rates. They are not

allowed to offer you a lower rate and compete for that. So there is really no

point to searching for a lender with the lowest rate.

However, many lenders offer great rate reduction discounts. Usually you get

a discount after making several payments on time or if you set an automatic

payment from your bank account. When using online calculator, most lenders give

you your rate after the discounts. So you will have to be careful and read all

conditions of your new loan to make sure that you are eligible for the benefits.

2. How many times can I consolidate?

Usually you can only consolidate your loans once. That's why it is important

to do your home work and select the right lender the first time. There are two

circumstances when you can reconsolidate your loan. First, if you decide to

study more and take additional loans. Second, if consolidating the first time

not all your previous loans have been captured. This is theoretically possible,

but in practice happens very rarely. Debt consolidating companies are usually

pretty good about including all your outstanding loans in a new loan.

3. What repayment plan to choose?

Most companies offer at least two repayment plans - standard and graduate.

They may be called differently by different lenders, but the general idea is

the same. The standard plan is the most simple - your monthly payments are the

same for the life of your loan. With this plan you usually pay the least amount

of interest.

Graduate plan supposes that at first your monthly payment is lower; it can

be low for 12 or 24 month. But your later payments are higher. This plan is

perfect for graduates who are not sure of finding well paid work straight after

graduation or if you expect other major expenses, like having a baby. By choosing

a graduate plan you will pay more interest that on standard repayment plan,

but the difference is usually not all that much.

There also might be other plans that allow you to make lower monthly payments,

but you will have to pay off your loan longer. These plans are usually the most

costly, because you end up paying much more interest.

4. Does bad credit affect student debt consolidation?

If you have federal student loans and go for a federal loan consolidation program,

your credit history doesn't matter. With private lenders it would be more difficult

to get approved if you have a bad credit. So if you have federal and private

loans, consolidate federal loans first, this will improve your credit score.

If you don't have any federal loans, take steps to improve your credit. The

easies way is to get a credit card and pay it on time fore several months.

5. How to chose the best loan consolidation company?

As you already know, lenders can't really offer your lower rates than others.

So it makes sense to look for a lender that offers the most benefits in rate

reduction. Other points to keep in mind are: if there are any additional fees

for consolidation and if deferment option is available. When you go for a federal

loan consolidation, there are several circumstances when your payments can be

deferred, such as financial hardship, illness or unemployment. If you are going

for a privet lender for your student loan consolidation, it is important that

this lender offers deferment option as well.

Also bear in mind, that you can't always choose the company to consolidate

your student loans. If your took all your loans from the same company, you can

only consolidate with that same lender. However, if you have loans by different

lenders you are free to choose from any lender approved by US government.

Tanya Turner is a publisher of Loan Consolidation Guide , which provides you with comparison of best student loan consolidation programs . The Guide also offers tips and advice on how to save the most when consolidating your loans.