College Loan Consolidation

A college loan consolidation could be the answer for anyone who is struggling to find a way out from under mounting educational debt. Some lenders claim that students who borrowed to cover the cost of higher education might be able to cut monthly payments by as much as fifty percent. Careful research and comparison could yield interest rates that are both reasonable and fixed. Some online lenders offer the opportunity to apply via the Internet and charge no application or origination fees. One reason that monthly payments are significantly lower with these loans is that the financing is extended over many years. Some financing can continue for up to thirty years. These lenders frequently do not require credit checks or co-signers. Both students and parents of students are eligible to apply for this financing. A consumer should do careful research before moving forward with many of these lenders. Some student debt already carries extremely low interest rates, so the expense of refinancing at a possibly higher interest rate may not be such a good idea. But the borrower who has multiple loans may find a college loan consolidation to be the best way to pay off education related debt.

Student financing can come in the form of federally insured loans as well as private financing. If a graduate has financed an education with federal funds, those funds can be consolidated through a federal college loan consolidation program. The interest rates for these loans are usually fixed. For many former students who are in the process of beginning a new life in the work force, the ability to refinance multiple loans and combine the costs of all the loans into one can provide needed relief from crushing monthly payments. Creating a more manageable way to deal with this debt can make life much easier and possibly even increase personal credit scores. The standard repayment plans on original student debt generally stretch out over ten years. But since many university educations can cost as much as a small mortgage, a thirty year option does not seem unreasonable. The ability to make larger payments than are required can be another benefit of this form of financing. An additional benefit to federal college loan consolidation might be found in the fact that there is generally no penalty for early pay off.

The more flexible options associated with repayment using college loan consolidation programs has made them an attractive option for graduates who are struggling with educational debt. Many lenders offer a faster turn around time on these refinancing opportunities, some boasting a turn around time of as little as thirty to sixty days. Collateral, co-signers, and in some cases, even employment are often not necessary to qualify for this financing. An outstanding educational debt of more that ten thousand dollars is a prerequisite for attaining one of these loans. The interest rates for this financing may be calculated based on a weighted average of the rates that the debtor is currently paying on their existing loans. This average is rounded up to the nearest 1/8 of one percent. Standard federal student loans will usually have a six month grace period following graduation. For many borrowers, applying for college loan consolidation during this six month grace period can result in significant savings. Waiting until this grace period has passed may increase interest rates on any kind of refinancing by as much as six tenths of a percent.

The types of financing that are eligible for college loan consolidation include subsidized and unsubsidized Stafford loans as well as loans that come under the headings of HEAL/HPSL, Parent PLUS, Perkins, and nursing school loans. If a student has already consolidated loans from an undergraduate degree and wishes to refinance again including debt that was accumulated earning a graduate degree, this can be done as well. However, it is not a good idea to consolidate federal student debt in combination with private student debt. This is because the rules that apply to private educational financing differ from those that apply to federal loans. Other types of debt including credit card debt and automobile financing also can not be included in to any kind of federal educational loan consolidation plan. At one time it was possible to consolidate the educational debt belonging to two separate borrowers into one loan as long as those borrowers were married. Unfortunately, this is no longer the case. The Bible discusses the importance of allowing good to prevail. "Be not overcome of evil, but overcome evil with good." (Romans 12:21)

Private educational funding can be consolidated as well, but certain regulations that apply to federal financing do not apply to private debt. For example, it is not possible to defer payments on a private college loan consolidation if a borrower wishes to go back to school or in the event of a financial hardship. Private educational funding does not allow for tax deductions on interest paid. Loan forgiveness for graduates who apply for federal refinancing and choose certain career paths is not available for private refinancing. These career paths include teaching in economic development zones, certain federal volunteer programs, and military service. In the event of the borrower's death, federal loans are forgiven. This is not the case with private financing. The borrower's next of kin must assume the debt. Another difference between federal and private financing is the interest rates. Private educational lending opportunities often come with variable interest rates rather than fixed.

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