How Does Student Loan Consolidation Work?
Saturday, November 04, 2006
Nowadays, the cost of higher education is getting more and more
expensive. Some families may not be able to afford to send their
son or daughter for further education. Getting a student loan
will help.
There are 2 broad categories of student loans available.
Government student loans and private student loans
Government or federal student loans are funded and administered
by the US Department Of Education. It is classified under
Federal Student Loans Aid Program. They have very few
requirements other than you are studying in a US college or
university. International students may also apply though
approval is on a case by case basis.
Every year, the student loan aid program disburse nearly 60
billion dollars so it is a good choice for get a student loan
from the government. Thus the interest rates are pretty low.
Private student loans are funded and administered by banks and
other financial institutions. These lenders provide student
loans at a higher interest rate compared to federal student
loans. Some common student loans available are from Citibank
and Sallie Mae
You are allowed to apply for both private and federal student
loans for your education needs although I would not recommend
it.
For some students who have a few student loans to repay
concurrently, it can be a financial drain on their family
finances. That is where student loan consolidation comes in.
Student loan consolidation basically consolidates all your
student loans into one loan so that it is easier to manage and
make payments. When you are getting a student loan
consolidation whether from the government or the private
market, your existing student loans are paid for and erased by
the student loan consolidation lender. The balances are
transferred to the new student loan consolidation. Thus you
start a new loan and only needs to make a single payment each
month.
There are many advantages to using student loan consolidation.
The interest rates will be lower since it takes the average
interest rates of your previous student loans. Thus due to
government legislation, the maximum interest rate cannot be
higher than 8.25 percent.
It becomes a lot easier to manage a single student loan and
payment are easier. The repayment options are quite flexible.
For federal student loan consolidation, you can opt to start
repaying after you have graduated from school. There are also
several other options.
Another beneficial side-effect of student loan consolidation is
that it can also improves your credit score. Since you are
effectively clearing all your old student loans and taking a
new one, your credit score will increase and is important if
plan to take other types of loans in the future.
About The Author: Ricky Lim works in a finance company
specialising in student loan consolidation. Get more
information, tools and resources on student loan consolidation,
visit this site: http://www.about-studentloan.com
posted by Dennis Cheesman @ 7:14 AM,
