Steps for School Loan Consolidation

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Before consolidating your school loan, you should have detailed information about the school loan consolidation process. The main objective of school loan consolidation programs is to manage your finances proficiently by providing you with a number of flexibilities and benefits. These loans allow you to make your payments to one lender and improve your credit scores by reducing monthly payments.

Loan consolidation programs aim to create new consolidated loans and consolidate multiple loans into one debt. These programs make it possible to repay your loan by combining several types of student loans into one new loan. The main advantage of loan consolidation is the low interest rate which makes the borrower less likely to default on a loan. The monthly payment amount on a consolidated loan is usually low and you are allowed to make your payments once a month. Also, the repayment term can be extended beyond what was offered in the latest loan programs. These features make paying your loans more convenient and manageable.

After making your decision to consolidate your school loan, you need to see which category you fall into.

o Students and parents are eligible to get their loans consolidated, but not under one package.

o Married students cannot consolidate their loans. Each spouse is individually responsible for payment.

o You can consolidate your school loan during your grace period, but not if you are still in school.

o Defaulted loans can be consolidated but must have a satisfactory repayment agreement.

Before consolidating your loans, you should determine the number of consolidation programs available and which one will best suit your credentials. The two main types of loans are; federal consolidation loans and private consolidation loans.

Federal consolidation loans are further divided into two broad categories, namely the Federal Family Education Loan (FFEL) program and the Federal Direct Loan program.

The Federal Family Education Loans Program offers loans from private lenders. These loans are guaranteed by the guarantors and reinsured by the federal government. 4 types of federal consolidation loans are available:

1. Stafford (Subsidized): In this loan, accrued interest is paid by the federal government.

2. Stafford (unsubsidized): Accrued interest is payable by the student even if enrolled in school.

3. PLUS: These loans can be used by parents with a good credit history, so that they can pay for their child’s education costs.

4. Perkins: These low interest loans are suitable for needy children who want to continue their education.

The US Department of Education has introduced direct federal loans for the convenience of students. This program offers the following loans:

1. Direct Subsidized Consolidation Loans: These loans are eligible for interest rate subsidies, such as FFELP Subsidized and Direct Loans, and Federal Perkins Loans.

2. Direct unsubsidized consolidation loans: these loans are not eligible for interest subsidies. If you wish to have any of your unsubsidized loans consolidated, you will receive an unsubsidized direct consolidation loan.

3. Direct PLUS consolidation loans: These loans combine FFELP PLUS and Direct PLUS loans.

After selecting a good consolidation package, you need to search for a reputable lender. It is essential to find out about the reputation and credibility of the consolidating company with which you are going to deal. Here are some relevant questions that will help you assess the status of the business.

o What are the particularities of their consolidation package?

o How many years have they been in this profession?

o What benefits or discounts does the company offer?

o Is their consolidation program listed under federal loan or private loan?

o How much do they charge for the application processor is it free?

After selecting a consolidating company according to your needs, request its information package either by post or by e-mail. If you accept their terms and conditions mentioned in the form, sign it and send it back to the company. Next, the company checks your outstanding debts with your previous lender. They send the check for the amount to be paid by you after receiving a verification certificate from the lender.



Source by Azmat Batool

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