Thursday, September 29, 2011

Top 7 Great Benefits for Getting a Student Loan Consolidation

The Top Seven Benefits of Consolidating Student Loans

In the U.S., the Federal Direct Student Loan Program (FDLP) include loans that allow students to consolidate loans into one debt. The loans that can be consolidated under this program are available for many federal loans, including Stafford Loans, PLUS Loans, SLS (Supplemental Loan for Students) Loans, Federal Perkins Loans, Health Professional Student Loans, HEAL (Health Education Assistance Loans), NSL (Nursing Student Loans), Guaranteed Student Loans, and Direct Loans. There are seven benefits for getting a student loan consolidation for loans like these.

1. The terms for consolidation loans are longer than other loans. A term of 10-30 years can be chosen in which to pay off the loan, although the standard is a 10-year term, which keeps interest low. The option for longer repayment terms results in lower monthly repayments of the loan.

2. Any federal loan can be consolidated, even a single loan. This means that rather than multiple monthly payments on multiple loans, only one monthly payment is necessary.

3. A loan can be consolidated with any lender. This applies even if all of your loans are with one lender. This makes it possible to research and negotiate with different lenders to make sure you get a lender with lower interest rates or discounts. Lenders may not discriminate based on the number or type of loans, the interest rate on the loans, the educational institution, or the type of repayment schedule sought. However, they may discriminate based on the amount of the loans and they usually have a minimum loan balance for lenders.

4. Consolidated loans offer flexibility. Both students and parents may consolidate loans, although they may not consolidate their loans together. Students can only consolidate loans after they get out of school or when they enter repayment, and parents can consolidate loans at any time.

5. Consolidating your loan is free! There are no fees to consolidate student loans. If any up front fees are asked for, it is likely a scam. There is also no credit check on the borrower when he or she consolidates his or her loans.

6. The interest on the loan is likely to be lower if the loan is consolidated. The interest rate on a consolidated loan is the average of the loans being consolidated with a slight weight. They are rounded up to the next 1/8th of a percent. Interest rates are capped at 8.25% but usually have a lower fixed rate. Also, if you have a PLUS loan, the PLUS loan interest rate loophole can reduced the interest rate on 8.5% fixed interest rate loans by 0.25% through consolidation.

7. Customer service is oftentimes better with consolidated loans. Many lenders offer online loan applications that are simpler to apply for than other loan applications. An online account to access your account and loan information is typical, as is free customer service 24 hours a day, 7 days a week, year-round with minimal time on hold. Some lenders offer life-of-loan servicing. This guarantees that even if the loan is sold, the same servicer will be used. Many schools have a preferred lender list of the lenders the school thinks are the best for their students.

Consolidating student loans offers seven major benefits. Any federal loan can be consolidated, and consolidated loans have longer loan terms, more flexibility (with both lender and who can consolidate), free consolidation, better customer service, and lower interest.

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