Steps to Follow for School Loan Consolidation

Before getting your school loan consolidated, you need to have thorough information about school loan consolidation process. The main aim of school loan consolidation programs is to handle your finances proficiently by offering you number of flexibilities and advantages. These loans make it convenient to make your payments to one lender and improve your credit scores by reducing monthly payments.

Loan consolidation programs are meant to create new consolidated loans and to bring multiple loans under one debt. These programs make your loan repayment possible by combining several types of educational loans into one new loan. The major benefit of loan consolidation is the low interest rate which make borrower’s less likely to default on a loan. The monthly payment amount on a consolidated loan is usually low and you are permitted to make your payments once in the month. Additionally, the amount of time to repay may be extended beyond what was offered in last loan programs. These features make the payment of your loans more convenient and manageable.

After taking your decision to get your school loan consolidated, you need to see which category you fall in.

o Both students and parents are eligible to get their loans consolidate but not under one package.

o Married students cannot get their loans consolidate together. Each of the spouses is responsible individually for the payment.

o You can consolidate your school loan during your grace period, but not if you are still in school.

o Loans that are in default can be consolidated but should have a satisfactory repayment arrangement.

Before getting your loans consolidate, you need to find how many consolidation programs are available and which will suit your credentials the most. The two major types of loans are; federal consolidation loans and private consolidation loans.

Federal consolidation loans are further divided into two major categories, namely, Federal Family Education Loan (FFEL) program and the Federal Direct Loan program.

Federal Family Education Loan program offers loan from private lenders. These loans are guaranteed by the guarantors and reinsured by the federal government. 4 types of federal consolidation loans are available:

1. Stafford (Subsidized): In this loan the interest being accumulated is paid by the federal government.

2. Stafford (Un-subsidized): The interest that is being accrued is payable by the student even if he is enrolled in school.

3. PLUS: These loans can be used by the parents with a good credit history, so they can pay for their child’s educational expenses.

4. Perkins: These low interest rate loans are suitable for needy children who want to continue their education.

US department of education have introduced Federal direct Loans for the convenience of the students. This program offers the following loans:

1. Direct Subsidized Consolidation Loans: These loans are eligible for interest subsidies, such as subsidized FFELP and Direct Loans, and Federal Perkins Loans.

2. Direct Unsubsidized Consolidation Loans: These loans are not eligible for interest subsidies. If you want any of your unsubsidized loans to be consolidated, then you will receive an Unsubsidized Direct Consolidation Loan.

3. Direct PLUS Consolidation Loans: These loans combine FFELP PLUS and Direct PLUS loans.

After selecting a good consolidating package, you need to look for a trustworthy lender. It is of vital importance to find out about the reputation and credibility of the consolidating company you are going to deal with. Here are few relevant questions which will help you evaluate the status of the company.

o What are the special features of their consolidating package?

o Since how many years they have been in this business?

o What benefits or discounts the company offers?

o Their consolidation program is enrolled under federal loan or the private loan?

o How much do they charge for the application processor is it free of cost?

After selecting a consolidating company according to your requirements, ask for their information package either by post or by e-mail. If you agree to their terms and conditions mentioned in the form, sign it and send it back to the company. Then the company verifies your pending debts from your previous lender. They send the check of the amount payable by you after receiving a verification certificate from the lender.

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