Parents of college students, current college students and college graduates all understand just
how confusing student loans can be. It's not uncommon to have multiple loans from a variety of
lenders, all with different interest rates, terms, and payback amounts.
Keeping track of student loans could almost be a full time job in some cases. There are easier
ways to deal with multiple student loans though: Consolidation.
Student loan consolidation makes everything much easier. Instead of tracking multiple loans,
lenders, payment dates and payment amounts... everything is rolled into one neat package. You
make just one payment each month for a set amount, and you have just one total debt to keep
track of.
Technically student loan consolidation is the process of getting one large loan that pays off all the
smaller ones. Then you're left with just that one loan to deal with from that point forward, with the
loan period generally lasting for ten years. It's important to know though, that student loan
consolidation falls under different rules than other types of loan consolidations do, so let's cover
those differences here...
1. You can't consolidate any student loans that are currently in default. If you've already defaulted
on one or more of your student loans, you need to get a payment plan worked out and in place
before you can roll those into a consolidation loan.
If however, you're loans are still in their grace period - often six to nine months after you've
graduated or stopped attending college - or you've already started paying on your student loans
and your account is current, you can do a student loan consolidation.
2. Student consolidation loans aren't always available for student loans that were obtained
through private funding sources. A bit of research may turn up some sources that are willing to
consolidate private student loans for you though.
If your student loans are through common federal education funding sources such as Stafford,
Direct loans, Perkins or Guaranteed student loans, these can be incorporated into - and paid off
by - a student consolidation loan.
3. Interest rates are calculated based on your outstanding student loans. When you get a student
consolidation loan, the interest rates will be based on an average of your current loan interest
rates. So if you only have a few loans at 5% interest, your consolidation loan is likely to have a 5%
interest rate. If however, you have many loans which vary interest rates widely, the interest rate on
your student consolidation loan will be based on a weighted average of all your existing loan
interest rates.
4. Consolidating student loans shouldn't cost you anything. If you come across a lender who
offers you student loan consolidation for a low fee, keep looking around. There should be no fee
for the consolidation.
5. There may be minimums required. Many student loan consolidation programs require you to
have a minimum amount of student loan debt. If your debt is less than that, you won't qualify for
the consolidation loan through that lender. A common minimum amount is $5000, but it's fairly
easy to find lenders who will consolidate student loans which total less than that. You can also
always go through the Federal student loan consolidation program, because that one has no
minimum requirements.
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