Consolidation of bills or debts for students


Student loans are in a class of their own. This is because they are guaranteed by the government and provided for by federal programs. Since these loans work differently than normal loans, the consolidation processes are also a bit different. These differences show up in the types of loans that can be consolidated, the grace periods allowed on those loans, and the way interest rates are determined.

First of all, there are only three types of loans that can be consolidated through the student loan consolidation program. These loans are: Stafford Loans, PLUS Loans and Federal Perkins Loans. Each of these loans has its own rules and regulations that students follow to qualify, and these differences are all taken into consideration during the student consolidation process. Students are not allowed to consolidate personal or general debt that is not part of their student loans.

Among the student loans available, several of them operate with grace periods and special forgiveness rules that are not standard on other loans. Thanks to the consolidation process, these extras are not carried forward. This means that you will have to pay on time and in full without any compensation.

Student consolidation loan interest rates are determined differently than general loan rates. Normally, consolidation loans will be determined based on your credit score. However, student consolidation loans are determined by the average of all your student loans, adjusted for the value of each loan, then rounded to the nearest 0.125%. The highest interest rate that can be charged for a consolidation student loan is 8.25%. In 1998, the Federal Loan Consolidation Program elected to change all student loan consolidations to fixed interest rates, instead of the variable interest rates available on other types of loans. It’s also something to consider when thinking about consolidating your student loans.

Since student loans are guaranteed by the government, they are administered by one of two federal programs: the Federal Direct Student Loans Program and the Federal Family Student Loans Program. These two programs work together to provide student loan services to anyone in need, but only the Federal Direct Student Loans program is responsible for student loan consolidation.

When considering a student loan consolidation, it is very important to first review all of your current student loans. Because of the way interest rates are determined on student consolidation loans, it may be safer to hold multiple loans instead of just one. On the other hand, if consolidating gives you a lower interest rate, it’s a good idea to consolidate. Not to mention the fact that consolidating your student loans will extend the payments by ten to thirty years, which means much lower payments than a normal student loan. However, if you choose to spread your payments over several years, the amount you pay in interest will be higher than if you paid off your debt sooner. Be sure to consider the allowances you will lose and the interest rates you will face when deciding to consolidate your student loans.

Source by Robin Boddy

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