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School Loan Consolidation – Overview & Companies

September 23, 2011

School Loan Consolidation

School loan consolidation can be done for many types of loans pertaining to schoo like college, vocational school among many others, and can be done on both federal loans as well as private loans. If you aren’t familiar with how school loan consolidation works, the basic overview of the process consists of a consolidation company essentially paying off your school loans, and then you pay a monthly payment to them only.

school loan consolidation

The school loan consolidation process not only will allow you to only have to worry about paying one company, but also can result in lower monthly payments and debt total as consolidators try to negotiate a lower debt as well as lower interest rates, and offer longer repayment terms which can mean lower monthly payments.

Althoug this can be great for some, it should only be used for certain debt situations which are discussed below. ALso discuseed is how your rates are created and some of the benefits as well as tips to follow and companies to use if you choose to use school loan consolidation.

Who Should Use School Loan Consolidation?

If you aren’t having trouble paying your student loan payments each month than the act of school loan consolidation will probably not benefit you, but if you can’t afford them, then consolidating will drop your monthly payment total by providing you with a longer repayment period, which lowers the monthly dues but means that you will pay more in interest because of more years of repayment.

Another alternative to school loan consolidation is the Income Based Repayment Plan (IBR) available now on most all loans. This is where you pay a monthly fee of what is usually around 15 percent of your income. It should be known that once someone choose to use the Income Based Repayment Plan, their repayment period is immediately set to 25 years from when the opted to use it, but you can use the IBR and pay it off faster when you have more income coming in each month. If at the end of the 25 years, you have debt left, it is wiped away and taxed as income.

School Loan Consolidation – How It works & General Information

  • The rate that you will pay for school loan conslidation is based of this equation; It is the difference between your gross income and $16,245 which is considered to be 150 pecent of  a poverty level of income.
  • First off federal school loans cannot be consolidated with private student loans they must be consolidated seperately.
  • One of the main benefits of fedeal school loan consolidation is not credit based so pretty much anyone can qualify without having to provide a cosigner as private student loan consolidation needs you to provide a good credit score.
  • If a parent of relative co signed for a loan, the co signers name can be taken off the account after about 2-4 years after a person starts school loan conslidation. This provides a chance for the student to start building a credit score as well as makes the  co signer no longer liable.

TIPS For School Loan Consolidation

If you choose use a school loan consolidation company, here are a few tips that can help you along the way.

  • First off, a few questions you should ask the potential consolidator if there are any prepayment penalties, these restrict your from paying over the minimum and you don’t want these, are there activation fees which are fees for starting the service and can be avoided through certain conslidators like non profit organizations, and what is the maximum repayment term and maximum interst rate.
  • Compare different school loan consolidation companies before filling out any personal information. This can help you find the best interest rate, as well as a good lender.
  • Do your best to consolidate your school loans during your grace period as interest deductions are usually granted during this period/
  • Interest rates change on July 1st of each year so stay knowledgable on what is going on with interest rates, and if they are looking like they are goin up, then it will be a good call to go with the current interest rate, and vice versa.

School Loan Conslidation Companies

Here are some companies that have proved reputable for school loan conslidation, and are worthy to check out if you are going to consolidate.

  • Next Student
  • Loan Approval Direct
  • US Department Of Education
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