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STUDENT LOAN CONSOLIDATION
Student loan consolidation allows you to combine several existing student or parent loans into one new loan, using a new lender to pay off the balances on the other loans. There is also a possibility to take a federal student loan consolidation. With a student loan consolidation you must repay to one single lender. The student loan must be either in grace period (six months after finishing your studies) or repayment, and the minimum amount of money for student loan debt consolidation is USD 5000.
You should review all the advantages and disadvantages of a student loan consolidation program, comparing the cost of repayment with the cost of repaying a single student loan, before choosing the student loan options.
• Student loan consolidation centralize your payments: you will only pay to one single financial institution.
• You have an extended repayment period, depending on the total amount borrowed on your student loan.
• Your bank or other financial institution should offer you a phased repayment plan taking your income into account so that you can still face your monthly payments and still have a good credit qualification as a borrower.
• You can reduce your monthly repayment amount, extending the repayment period with a student loan consolidation.
• The resulting interest rate will usually be lower than that of one or more of the student loans.
• The interest rate for student loan consolidation is fixed (for Federal Direct Loans and Federal Family Education Loans) during the repayment period and the interest rate will never rise higher than 8.25 %.
• Because the interest rate is fixed, students (or their parents) can’t benefit on their student loan consolidation from future interest rate falls.
• The interest charges of your student loan consolidation may increase a lot during the loan’s life if you take a long time to repay it.
• There are no fees for student loan consolidation.
• Student loan consolidation can’t be undone once they are approved, because they have been repaid in full to the respective creditors and have ceased to exist.
Student loan consolidation with overdue or unfulfilled repayments may still be considered for consolidation if a satisfactory repayment plan has been agreed with the bank or other creditor.
Married couples may also consolidate their student loans together if they agree to repay the student loan regardless of how much each of them individually owed beforehand. If they change their marital status in the future, that will not change their debt situation on the student loan consolidation.
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