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Learning About Student Loan Consolidation Services

There are a number of options out there for students who need to borrow money for college. The Federal government makes a large amount of funds available each year to students all over the country in the form of federal student loans such as Stafford loans, PLUS loans and ROTC plans. There are also private options available that are administered by banks and other types of financial institutions such as Citibank and Sallie Mae. In most cases, these are unsecured loans that will usually be at higher interest rates than federally funded loans. Often, students run into problems being able to meet the monthly payments of their student loans, especially if they have many different loans outstanding through a number of different sources. Being able to meet three or four different monthly payments can tax the finances of a recent graduate who has either not found a job yet, or is just starting out in his/her field.

Thankfully, there are ways to consolidate student loans into one loan, lowering the total monthly payment to a more manageable amount. Federal loans are the easiest to do this with, as the federal government offers a solution through its own lending arm that streamlines the process of debt consolidation. To be eligible for federal student loan consolidation, one has to be no longer enrolled in school, and must be either in the grace period of the loan, or actively repaying it.

There are private student loan consolidation services as well, which are geared toward privately funded loans such as those from banks. If the borrower has a mixture of federal loans and private loans, it is important to keep the two types separate, as federal consolidation typically involves a lower interest rate and better repayment terms. Refinancing federal loans through a private service will squander any benefits that the borrower may have had through the federal system.

It can also be beneficial to consolidate private student loan debt at well, even though the interest rate may not be as favorable as that acquired through the federal process. Reducing the number of institutions that require a payment each month can greatly reduce the monthly outlay that the student is required to come up with. Also, an interest rate on the new loan that is lower than the average rate on the existing private loans is sometimes possible to achieve.

A disadvantage of consolidation can be that the loan is spread out over a longer period of time, increasing the total amount due to the loan issuer. Also, the interest rate could rise if the general interest rate climate has gone up since the original loans were taken out. Even though the monthly payments might be lower than before, it would mean more money out of the borrower's pocket in the long run.

Overall, using a student loan consolidation service can be a beneficial thing to do, especially to one who may not be able to afford his/her current situation. It's important though, to never mix federal and private funds, as doing so may result in a loss of the benefits that government loans can offer.

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