In the United States, there are many ways for college graduates, or parents of college students, to
manage repayment on multiple student loans, plus lower the overall total monthly student loan
payments.
The most common option is student loan consolidation. Getting a student consolidation loan can
actually lower your monthly payments by as much as 50-60%. And there are federal consolidation
programs which are backed by the federal government. These student consolidation loan
programs allow either parents or graduates to merge all their student loans into one loan, lock in
lower interest rates, and enjoy lower monthly payments.
If your student loan debt totals only a few thousand dollars, your best bet is to go directly through
the federal student loan consolidation program because they have no minimum monetary
requirements for consolidation.
If however, you have large student loan balances - over $5,000 or $10,000 - you might consider
shopping around a bit first. Many national lenders can offer you student loan consolidation with
interest rates as low as 2.5% - 5%. Sometimes they even offer additional incentives and
reductions on interest rates when you make your monthly payment automatically through
electronic bank account deductions, or after you've made a number of sequential payments on
time.
When looking at student loan consolidation options, you need to be aware there are specific rules
and criteria which must be met.
You can't for instance, consolidate your student loans if you're still attending school. And you can't
consolidate any student loans which are in default - meaning you haven't been making the
payments.
You also cannot consolidate student loans which have been consolidated in the past, but you can
do a student loan consolidation if you have a new loan to add. If you finished your undergraduate
education for instance, and consolidated the student loans from that, but then went on to acquire
new student loans during your graduate period, you can get a consolidation loan to add those new
ones into the mix.
Generally you must either be in the grace period of your loans - the grace period usually lasts six
to nine months after you've graduated or stopped attending school - or be in the midst of
repayment. If you've already started repaying your student loans, they must be fully up to date and
in good standing before you can consolidate them.
If your loans have been deferred, these can usually be consolidated too.
Most federal student loans can be consolidated, but you will have a new interest rate on the
student consolidation loan. Your consolidation loan interest rate will be factored as a weighted
average from your original loans.
Getting a student consolidation loan usually requires no credit check and no fees, additional
charges, or pre-payment penalties.
In addition to the above mentioned benefits, consolidating your student loans can actually help
improve your credit score. Part of your credit score is factored based on how much outstanding
debt you have, and how many accounts you have open. Too many of either can lower your credit
score. By consolidating multiple student loans though, you're reducing the number of accounts
you have open. This alone can help improve your overall credit score.
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