But how to consolidate student loans so, that all the influencing things are thoroughly thought? Are there some hidden secrets or future surprises, which only some know? How a graduate can know the details? Well, these are the questions, which this article tries to solve.
The general target for consolidating student loans is to save money and to make the loan management easier, or simpler. These are good targets, but to reach them a borrower has to go through many details concerning the old loans and the new consolidated loan.
1. The Starting Point Is Your Financial Plan.
A graduate can always ask offers about the consolidated loans to find out how to consolidate student loans and to see, whether he will save or even lose some money. In the latter case, there is not a reason for the consolidation.
Many things have effects on the new loan, like whether a graduate has got a job, his or her ability to pay for the loan, the general interest rate level and whether he had some benefits from the single loans, which he will lose, if he will consolidate.
2. A Borrower Can Consolidate Federal Loans And Private Loans.
A borrower has to remember, that he can consolidate federal loans into one loan, but not with the private loans, which he has to consolidate separately. The federal loans have fixed interest rates and better terms, which is the reason for this. If a borrower has subsidized single loans with lower interest rate, the question is, shall he win something? It wise to check, whether the consolidation of the two federal loans will mean the loss of some benefits. A borrower cannot consolidate his and the loans of his wife into one loan.
3. The Variable Interest Rates Offer The Biggest Chances.
If a graduate has loans with the variable interest rates and he will consolidate them into one new loan, he can get good savings. The interest rate of the consolidated loan is the average of all the single loans. The consolidation during Grace Period, i.e. within 6 months after the graduation, brings an additional 0,6 % savings in the interest rate. If a graduate has new federal loans it is difficult to save with the interest rates.
4. The Longer Running Time Add Costs.
The longer is the running time, the more a graduate will pay interests. However, he will get lower monthly payments, so a graduate postpones the payments with the longer loan time. This is up to the financial plans of the borrower.
5. A Borrower Can Consolidate Government Loans Only Once.
This makes the timing critical. A borrower must be sure, whether he will consolidate and what terms he will pick. There are a few exceptions, but a borrower better to check all the details before signing anything.
It is dangerous to consolidate federal and private loans, because a borrower can lose a lot of benefits, for instance a right under the federal loan programs. These usually include deferment, forbearance, cancellation and affordable repayment rights.
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