Student Loan

Consolidation Loans

Consolidation Loans are either for students or for parents and allow you to combine multiple federal education loans into one loan with one monthly payment. The monthly payment may be lower as consolidation generally extends the repayment period. However, the amount to be repaid also increases as the years of repayment increase.
Resons you may want to consolidate…

You may want to consolidate if your cumulated monthly payments are too high for you or have variable interest rates on your loans, as the interest rate for a Direct Consolidation Loan is fixed. The rate for consolidated loans is computed as the weighted average of the interest rates on your loans rounded to the next nearest higher one-eighth of one percent and in capped to 8.25%.

The IBR Plan has a broader reach, being available under the Federal Family Education Loan Program as well. The monthly payment under IBR is in general lower than under ICR.

You can also benefit from other deferment benefits even if you have exhausted your options on you current Federal education loans.

Source:Student Loans Help

In a phrase consolidating your student loans means to bring all your student loans together in a single master loan, which is then used to pay off the balances on the loans you want to consolidate, and pay it to a single lender. By consolidation your loans you can significantly reduce your monthly payment (up to 50% in some cases!).



How student loan consolidation works:

In order to offer you up to 50% off, of your monthly payment, the lender will increase the period of your loan. As is, if you have two student loans, let’s say one for 36 months of $30.000+interest with monthly payment of $340 and the second for 24 months of $20.000+interest with monthly payment of $230, by consolidating them will result one loan of $50.000+interest for 50 months(new loan period) with 400$ monthly payment which is lower than $570 ($340 + $230).
note: sums are fictive, for exact savings using loan consolidation check with a lender.

What types of student loans can be consolidated?

Both, federal and private, loans can be consolidated.

Who can consolidate?

Both student and parent borrowers can consolidate their education loans. Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.

You can consolidate your loans with any lender

Students and parents can consolidate their loans with any lender, even if all of their loans are with a single lender.  The single holder rule was repealed on June 15, 2006, as part of the Emergency Supplemental Appropriations Act of 2006. Borrowers no longer need to exploit the single holder rule loopholes in order to consolidate with any lender.) This allows you to shop around for a lender that offers a lower rate or better discounts.

For federal loans, the eligibility will be determined by the financial aid administrator at the college or career school you plan to attend.
Bellow are the conditions that you have to comply:

1. demonstrate financial need (except for certain loans).
2. have a high school diploma or a General Education Development (GED) certificate, pass an ability-to-benefit (ATB) test approved by the U.S. Department of Education
3. be enrolled or accepted for enrollment as a regular student working toward a degree or certificate in an eligible program.
4. be a U.S. citizen or eligible noncitizen.(U.S. permanent resident who has an I-151, I-551, or I-551C)
5. have a valid Social Security Number.
6. register with the Selective Service if required. You can use the paper or electronic FAFSA to register, you can register at www.sss.gov, or you can call 1-847-688-6888. (TTY users can call 1-847-688-2567.)
7. maintain satisfactory academic progress once in school.
8. certify that you are not in default on a federal student loan and do not owe money on a federal student grant.
9. certify that you will use federal student aid only for educational purposes.

Alternative student loans or private loans are designed to cover up to the full cost of your education, including unexpected costs such as additional tuition, fees, books, housing, and other costs not covered by your financial aid package or federal loans.

Approval is generally based on your and your cosigner’s credit and should be considered after all federal student loans, grants and scholarships have been exhausted.

Alternative Student Loan Benefits

• No mandatory principal or interest payments until six months after graduation
• Incentives such as co-signer release, graduation rewards and interest rate reductions
• Borrow up to your cost of attendance, based on school certification

Alternative Student Loan Eligibility

You must be a U.S. citizen or a permanent resident, and be enrolled at least half-time in a 4 or 5 year degree program.

Determine How Much to Borrow

The following steps will help you determine how much money you need to borrow in private student loans so you don’t come up short or borrow more than you need:

• 1: Identify Your Annual Costs to Attend College
• 2: Assess Your Gift Aid (Scholarships and Grants)
• 3: Evaluate Your Existing Financial Resources
• 4: Calculate the Total Amount to Finance
• 5: Apply for a Certified Private Student Loan

Tip: Apply for a private college loan with a co-signer even if you could qualify for the student loan on your own. Your interest rate is typically based on the better of the two credit scores so if your co-signer has better credit, it could potentially get you a lower rate.

Has two types:

1. Federal Family Education Loan Program (FFELP) loans are provided by private lenders, such as banks, credit unions and savings & loan associations. These loans are guaranteed against default by the federal government.
2. Federal Direct Student Loan Program (FDSLP) loans or “Direct Loans”, administered by “Direct Lending Schools”, are provided by the US government directly to students and their parents.

All Stafford Loans are either subsidized the government pays the interest while you’re in school or unsubsidized you pay all the interest, although you can have the payments deferred until after graduation.

Stafford Loan Interest Rates and Fees

Stafford Loans have loan fees of 4%, which are deducted from the disbursement check. These fees consist of a 3% origination fee and a 1% default fee previously “guarantee fee”).

Apply for a Stafford Loan

To apply for a Stafford Loan, you must submit the FAFSAFree Application for Federal Student Aid. Even though the unsubsidized Stafford Loan is available to all students regardless of financial need, you must still submit the FASFA to be eligible. You can receive a subsidized loan and an unsubsidized loan for the same period.