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School Loan Consolidation |
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Written by Sam Jackson
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School loan consolidation may be a good investment for some individuals. School loans come in a variety of types. Some types of loans may not be consolidated while others should be. If you have a student loan, talk to your loan holder first about the type of loan you have. Is it a private or federal loan? The type of loan you have also will tell you how you can refinance it or consolidate it into another loan. In many cases, consolidating student loans makes them far more affordable. It can be one of the best ways to see a drop in the costs your monthly student loan payments.
What is Consolidation?Consolidating student loans is the process of combining several smaller loans into one larger one. Most students will have several small loans from various lenders by the time they are done with school. The problem is, this can make repayment difficult and time consuming. In addition, many of these loans will have different interest rates. Therefore, you may be tempted to consolidate all of the loans into one payment. Here is how the process works. You work with a student loan consolidation lender. They are able to give you one larger loan. This loan is used to pay off all of the other loans you have, including smaller loans. This means that you only have one payment to make at the end of the month (assuming all of your student loans have been included in the next consolidation loan.)
Most types of loans can be refinanced, as it is often called. Student loan consolidation is available for most federal loans, too. This includes your FFELP loans such as the PLUS, SLS and Stafford loans. It also includes Perkins loans, FISL, Health Professional Student Loans, HEAL loans, Guaranteed Student Loans, NSL and direct student loans. If you are unsure of the type of loan you have, simply contact the lender and request this information. It is important to note that even though you are consolidating these loans, they are still legally required to be paid off. They cannot be filed through a bankruptcy, as with private loans. All student loans are guaranteed to be paid back to the lender. Therefore, consolidating these loans does not get you off the hook from paying them back.
You may also be able to obtain a consolidation for other types of private loans you might have. Private student loans are loans obtained from local lenders, private companies or other non federal lenders. These loans are subject to the contracts that you signed. If you have it, read through the contract and determine what the requirements of consolidation or refinancing the loan are. Some of these loans may limit you from consolidating these loans with others. You also are unlikely to be able to mix both federal loans and private loans into the same consolidation loan, in some cases. Private consolidation loans may be an option for some people. Be sure to let your potential lender know that you do have a private loan. |
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