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Student Loan Consolidation

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A good college education is an invaluable investment in your future. Better education can widen your horizons, enhance your career choices and open the doors towards well -paying professions. Rising costs of higher education make it prohibitive for most families to pay for the college fees without resorting to some form of borrowing.

We take you through most of the options available for students seeking financial support for funding their college education - Federal loans, private loans and signature loans. Check out how student loan consolidation can bring you many a benefit. Find out how to consolidate federal student loan.


Student Loans

There are various options to consider when you want to apply for financial aid for your college education. Scholarships are funded by organizations and need not be repaid. Students can look for work and study programs that will allow them to earn money to pay off part of their education expenses. Education loans for students are offered in a variety of programs.

Federal student loans are made by private funds but are insured by the federal government. Financial institutions offer private loans to supplement the federal loan and can also be availed for special programs such as graduate studies in business, law, health and other professional courses. You can also borrow against the equity of your home or avail of a personal loan to pay for college.


Student Loan Consolidation

Ever so often, students leaving college are burdened with multiple loans with multiple lenders. Student loan consolidation is ideal to bundle all your student loans into a single loan with one repayment plan. Consolidation of student loans is much like the consolidation of all home mortgage loans.

The balances on all existing student loans are paid off and it is consolidated as one student loan. But consolidating your student loans is a viable alternative if you still have a considerable payment period. Consolidation of student loans is not worth it if you are close to the end of your loan term. The advantages of consolidating your student loans are:

  • Lowering of monthly payment
  • Combining multiple payments into a single monthly bill
  • Availing of lower rates of interest. This is ideal when the current rate of interest is lower than your earlier student loans. Besides, you can avail flexible repayment options and waiver of prepayment penalties.

According to Sallie Mae - the largest provider of student loans in the US, student loan consolidation can reduce monthly payments by up to 54%. You are allowed to consolidate your student loans if they total over $7,500 and you have borrowed from more than one lender. Some lenders will offer future rate discounts for prompt payment and discount for having monthly payments directly debited from your account. Any bank that participates in the Federal Family Education Loan Program or directly from the U.S. Department of Education is allowed to consolidate student loans.


Federal student loans are at variable interest rates. But when you consolidate the student loan, the interest rate becomes fixed at the current rate and the term of the loan is extended. With effect from July 1 2005, interest rates for student loans are expected to increase by nearly 35 - 40 %. Students can try and consolidate their loans prior to this deadline so as to lock in at the current interest rates. It is estimated that a student loan debt of $20,000 can be reduced by nearly $4,500 if the current interest rates are locked in.


Federal Student Loan


You need a valid Social Security Number so as to apply for federal student loans. It would be prudent to make your search for financial aid programs when you are in your junior high of high school. This will help you fill out forms and get all the necessary paperwork done well ahead of deadlines.

Completing the FAFSA (Free Application for Federal Student Aid) is necessary so that you inform the government of your need for financial assistance for college education. The SAR (Student Aid Report) will be sent to you as well as the colleges you are targeting.


The FFEL (Federal Family Education Loan) Program administered by the U.S. Department of Education offers Stafford Loans and PLUS loans. PLUS loans are taken by parents to pay part of the education expenses for a dependent undergraduate student. They will be subjected to a credit check and other general eligibility requirements so as to qualify for the loan. Subsidized Stafford Loans are offered to those in greater financial need.

The government pays the interest on these loans when you are in college. Unsubsidized Stafford Loans require you to pay all the interest, though it is deferred till you graduate. But this means that the size and cost of the loan increases. Colleges tackle financial aid in the form of Direct Loans Program or FFELP. Direct loans are provided and guaranteed by the government whereas private lenders provide FFELP.


The Perkins Loan is granted for undergraduate and graduate students who have exceptional financial need. This is a campus-based student aid program where the school is the lender from a pool of funds provided by the Federal government. This subsidized loan does not carry any origination and guarantee fees. This type of student loan is limited to $3,000 annually for undergraduate students and $5,000 annually for graduate students. Some institutions with ELO (Expanded Lending Option) are allowed to offer higher loan limits.


Student loan debt comes up for repayment once you graduate or leave school. There is a grace period of six months for Direct Stafford Loans and FFEL. The grace period for Federal Perkins Loans is nine months.


Federal Student Loan Consolidation

The benefits of consolidating a federal student loan are many. You can lower your monthly payments and lock in the interest rate with a federal student loan consolidation. This is particularly prudent since federal student loans carry a variable interest rate that is reassessed by Congress every year.

The additional savings go a long way in paying for other essentials. Do not forget the interest on the federal student loan that you can claim as tax deduction. Therefore it is advisable not to consolidate your private loans with federal student loans.

Signature Loan

Signature loans for students are privately insured loans that are offered to finance the cost of education. This is done by combing a Federal Stafford Loan with a private Signature Student loan. Signature loans for students are available for undergraduates, graduates and graduate health profession students.

If you need additional money beyond the amount granted by Federal Stafford Loan, the Signature Student Loan is the best low-cost alternative. This type of student loan is widely available and allows you to cover the total needs of your education. To be eligible for a Signature Student Loan, you should not have any default on loans and must possess good academic standing.


Student Loan Debt

One way to avoid student loan debt is to save for college with the College Savings Plan (529 plans). These investments are usually exempt from taxes and offer flexible contribution options. Earnings from these savings plans are tax-deferred and contributions may be deductible. A parent can invest in these options when the child is young so as to be sufficiently prepared for college education expenses. Parental control is exercised over this investment option in the event the child does not opt to go to college.


Student Loan UK

In the UK, student loans are available to help students when embarking on a course of higher education. The process of applying for a student loan begins with the local award authority. These loans can help students meet their living costs too. The Local Education Authority receives and processes applications from students from England and Wales.

Students from Scotland and Northern Ireland need to process their loan application to the Student Awards Agency and Education and Library Board respectively. The student loan applications are processed for eligibility.


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Student Loan Consolidation

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