Student Loan Consolidation Guide: What You Need to Know

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Looking for a student loan consolidation guide? Then you've come to the right place.

Student loans vary depending on the needs of the students.

Furthermore, students who need financing to pull through college may not have the option of being choosy with regard to the student loans they get.

After graduation, the loans that you took may or may not suit your financial situation.

What is Student Loan Consolidation?

A debt consolidation program offers the option of taking all your loans and combining them into a single debt with one interest rate. This is different than refinancing your loans, however, some companies offer both services.

Basically, you will pay your old loans using the new one.

This can lower your monthly debt repayments and your interest rates may also be lowered and you will have less paperwork to deal with.

Federal Student Debt Consolidation

There are two programs for consolidating your federal student loans.

These are Direct Consolidation Loan program for direct loans and the Federal Family Education Loan Program.

Applicants of these loan programs do not need credit history checks.

This is because they are under the insured loan program that is provided for students by the federal government.

With federal loans, a graduate can defer payments if he/she decides to continue with their education, has financial difficulties, or in the event of a disability.

Private Student Debt Consolidation

Private loan consolidations can also provide borrowers with many ways of saving money.

One can get longer repayment periods, lower interest rates, and lower monthly repayments. However, due to the immense benefits of consolidating federal debt, students should avoid consolidating their private and federal loans together.

This is because they may end up losing the benefits that are associated with student loan consolidation.

Application for Loan Consolidation

Depending on the type of loan that you want to consolidate, there are different ways of submitting your application.

Private loans can be applied through private lenders such as banks while federal loans are applied through the federal loan's websites.

Graduates can apply for student debt consolidation through standard mail or virtual application.

Requirements for Debt Consolidation

There are very few requirements that determine your eligibility for student debt consolidation. Any graduate who has a federal loan qualifies for consolidation.

However, you must be owing at least $20,000 in federal loans. In addition, one should not have a default status or be enrolled for part-time classes in school.

The eligibility criteria for private loans will vary depending on the financial institution.

5 Secrets To Refinancing Your Student Loan

Whether you have just graduated, or have a loan that you have taken out to achieve a master's degree, there is no doubt that student debt can be crippling, especially for millennials who didn't attend tuition-free colleges.

In a world of complex financial loan systems, knowing whether or not you have received a fair interest rate on your loan can be tough. Whether you are considering a debt consolidation loan, or perhaps a debt management program, it’s best to know a few tips and tricks to help you out with your journey on paying off student loans.

1. Ensure You’re Getting a Fair Interest Rate

The sole purpose of consolidating debt is not only to have the luxury of paying one single lender but to pay a lower interest as well. It may come as a surprise to you that many lenders value your business and are willing to negotiate their rates. Do not be scared to play a little hardball. Though you will be somewhat limited to the rates you will get because of your credit, you should seek to negotiate as much as possible.

Let lenders know that other lenders are willing to offer you a loan at a lower interest rate. Focus on things that make you a good candidate, like strong past work experience and what your potential earning power will be in the future when you finish your education.

2. Use a Search Engine for Consolidation Loans

As of late, the research process of finding a consolidation loan has become easier because of search engines for loans popping up left and right. Search engines will let you look at a variety of loan options from lenders bidding for your business, allowing you to select the most competitive rates.

Simply go online and Google “search engine for loans” and you will be presented with a variety of options to help expedite the process of finding a loan to consolidate your student debt. Type how much you are looking for, get presented with options, and then pick the one with the best rate.

3. What to Do When You Have Bad Credit

If you have bad credit, getting a loan to consolidate your student debt can certainly be a bit tough. You may be forced to pay higher interest rates, though, this may not be your only viable option. Consider a debt management program. Many companies will negotiate with your lenders and then will have you pay them directly. This will likely impact your credit, but it may be a better option than paying lofty interest fees.

If all else fails, you may have to consider a consumer proposal or even declaring bankruptcy. Depending on your state, or country, you may be legally relieved from your student debt. For example, in Canada, if you have filed for bankruptcy seven years after getting a student loan, you may have the debt forgiven.

4. Create a Loan Repayment Spreadsheet

Once you have gotten a new loan, it’s important to understand that you still have to repay the debt, and managing your payments and spending habits will be important. Simply creating a spreadsheet to keep track of your spending and repayments can go a long way.

You will not have to create one yourself, there are many templates you can find online to help you. Once you have created your plan, stick to it and you will be well on your way to success and eradicating your debt.

5. Know your credit score before consolidation

You should confirm your credit score numbers before consolidating your student loans.

This is an important step as it enables you to understand your current financial situation in detail. In addition, it will save you time because you will not have to go for lenders that need high credit scores.

With a poor credit score, you may end up getting higher interest rates which will make your loan repayments more expensive.

Student loans can accumulate fast, especially if you have several loans.

Furthermore, multiple payments can cause unimaginable stress due to all the monthly payments you will have to deal with.

In addition, if your loans have different repayment dates, you may end up with late payments resulting in extra charges and penalties.

In such instances, consolidation of your student debt is a worthwhile consideration.

If you're interested in learning about companies that offer student loan consolidation and refinancing student loans to a lower interest rate, you can learn more about that here.

I hope you enjoyed our student loan consolidation guide. Let us know if you have any questions below.

Marina Thomas
Marina Thomas
Marina Thomas is a marketing and communication expert. She also serves as content developer with many years of experience. She helps clients in long term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.