Why Should You Consolidate Your Student Loans?

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In the US, many college graduates make multiple student loan payments each month. Managing multiple student loans can be rather time consuming and confusing; consequently, many graduates and parents choose to consolidate student loans.

One of the greatest benefits of consolidating student loans is that doing so can actually lower your monthly payments by 50 percent or more. Student loan consolidation programs allow graduates to combine all eligible student loan debt into one loan, locking in a lower interest rate, and as a result securing lower monthly payments.

If your federal student loan debt amounts to less than about $5,000, you could benefit from a Federal Direct Consolidation Loan, which has no minimum amount to consolidate. You will have only one lender, the U.S. Department of Education, for all consolidated student loans. This type of student loan consolidation offers flexibility when setting up a repayment plan, with four separate plans tailored to meet the needs of individual borrowers.

If your total student loan debt amounts to much more than $5000, you should do some online comparison shopping, as national lenders often have better rates and offer additional discounts for making a certain number of on time payments, and paying by automatic monthly bank account deductions.

When looking at student loan consolidation options, you need to be aware there are specific rules and criteria which must be met. For instance, you may not consolidate your student loans while you're still attending school (unless you are within 6 months of graduation). And you can't consolidate federal student loans which are currently in default.

You also cannot consolidate student loans which have been previously consolidated, but you may do a student loan consolidation if you have a new loan to add. If, for example, you have finished your undergraduate studies and consolidated your student loans, but then go on to graduate school, you can get a new consolidation loan to combine all of your outstanding student loans.

Normally you must be either in the grace period of your loans, or currently making payments on them. The grace period usually lasts for six to nine months after you've graduated or left school. If you've already begun repaying your student loans, they must be current and in good standing before you can consolidate them. In most cases, student loans that are in deferment status can be consolidated.

When consolidating your student loans, your interest rate on the new loan will be based on a weighted average of your original interest rates. The fixed interest rate on your consolidation loan can lower your monthly payments significantly, especially if your existing loans have variable interest rates. If your existing loans have fixed interest rates, the benefit will not be as great.

One often overlooked benefit of student loan consolidation is that it can actually improve your credit. Your credit score is partially based on the number of credit accounts and outstanding loans you have. Too many can have an adverse effect on your credit. Consolidating your student loans will immediately reduce the number of accounts you have open, which will increase your credit score.

Consolidating student loans is not the right option for every college student and recent graduate, but in many cases it can be the best way to lower the monthly payments and simplify the repayment process. Combine this with an improved credit score, and student loan consolidation can be an excellent graduation present.

Article Source: http://depositarticles.com/

Gregg Pennington writes articles on a variety of topics including student loan debt and student loan consolidation. For more about student loans visit: www.onlinemoneysources.net/student-loan-consolidation.html

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