Consolidating personal school loans

Student loan consolidation is the process of taking multiple outstanding loans and reorganizing them into one monthly payment.

Consolidation loans like the Stafford Loans, for example, can help make this possible with Direct and Federal Family Education Loan (FFEL) consolidation programs.

The key terms for federal consolidation loans do not vary by lender: no application or origination fees are allowed and there are no prepayment penalties.

Federal law sets the period of time for paying back the loans and sets a ceiling on the interest rate.

If you’ve already been paying off your loans for a while, you can consolidate at any time.

Interest rates are determined by the federal government and change each year on July 1, so check with a lender to get their take on possible rate fluctuation.

If you can handle your monthly loan payment as is, carefully investigate how consolidating will change the total amount you’re expected to repay.

You can get a consolidation loan from any private lending institution with government approval, or from the Department of Education itself. Some offer favorable terms like interest-rate reduction for making on-time payments or choosing automatic withdrawal; others may offer repayment plans that better suit your financial situation.

You should do enough research to be able to negotiate the most favorable terms.

(There are no prepayment penalties for student consolidation loans.) On sites like Student Loans.gov, the student loan consolidation process must be completed in one single session.

In most cases, this process can take less than 30 minutes.

Yet despite the appeal — and its popularity — student loan consolidation isn’t for everyone.

Here are some frequently asked questions and answers that may help determine if it’s the right move for you.

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