Since the law changed in 2006, US borrowers who want to consolidate their student loans no longer have to stick with their original lender. The "single holder" rule made it so that students who already had student loans had to stay with the same lender. The good news is that you can now ask any approved lender to help you consolidate your student loans. The bad news is that they have so much information and so many products that it can be hard to choose!
The programme for the Federal Consolidation Loan.
Federal student loans include:
Stafford (subsidized and unsubsidized)
Federal Perkins loans
HPSL (health professions),
HEAL (health education)
LDS (loans for disadvantaged students)
PLUS loans (graduate and parent loans)
If you want to consolidate your student loans, you should know that private loans are not eligible for the federal consolidation loan programme. One of the best things about consolidating student loans is that the interest rate stays the same and the loan is paid back over a longer period of time. This means that your monthly payments will be less than the total amount of your current student loans. This is great if you have loans with variable interest rates because it takes away the worry that interest rates will go up in the future. Also, if you consolidate all of your student loans, you only have to make one payment, and there are no credit checks or fees, so think about it.
But there are some problems with using the federal programme to combine student loans. When you pay off a debt over a longer period of time, you pay more interest overall. If you do this with your student loans, you could end up paying more over the life of the loan. You might also have to pay more in interest, since the fixed rate on your consolidated student loans might be higher than the rate on your current loan.
The best time to think about consolidating student loans is during the grace period, which is the first six months after you graduate. This is because the interest rate is lower during this time. You can still apply if you miss this deadline, but you will have to pay a little more.
How to choose the best lender when you want to combine your student loans.
First, the government sets the maximum interest rate, which all lenders must follow. To get you to consolidate your student loans, many lenders will give you perks like a lower interest rate if you pay on time or if you pay each month by direct debit.
Take the time to look at the different ways you can consolidate your student loans. Some of the discounts might seem good at first, but you should think about the fact that it might be hard to make every payment on time or that electronic payments might not work for you in the future.
