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Consolidate Graduate Student Loans Online
Now that you are facing the stress of dealing with the repayment of your student loans,
you may want to opt for consolidation. Consolidating student loans can
be tricky, and several factors need to be taken into consideration when
making your decisions. But if you decide that the benefits of
consolidation outweigh the drawbacks, you can find a way to make it
work, whether you have federal or private loans.
There is a difference between consolidating federal and private loans.
The most glaring difference is that, with a Federal Consolidation Loan,
your interest rate is fixed in keeping with a federal formula, while
private consolidation interest rates can be either fixed or variable.
Variable means that the interest rate can increase at any moment. If you
are consolidating both types of loans, you should make sure to keep
them separate.
Borrowers are generally allowed up to 10 years to repay, when they
consolidate Federal Stafford and Graduate PLUS Loans. However, some
borrowers can qualify for the government's Extended Repayment Plan.
Borrowers who consolidate student loans through the Federal
Consolidation Loan Program can refinance one or multiple student loans
into one new fixed-rate loan. In other words, the original loan is paid
in full and another one is initiated.
Anyone with eligible Federal Student Loans can get a Federal
Consolidation Loan, and can do so without paying loan fees. Interest
rates are fixed for the life of the student loan. Rates are based on the
weighted average of the interest rates of the loans being consolidated,
rounded up to the nearest one-eighth-percent or 8.25 percent, whichever
is less. Borrowers do not need a credit card, and the fixed interest
rates allow them to avoid future variable rate increases.
You must meet certain eligibility requirements to consolidate student
loans received from the federal government. To qualify, the borrower
must have one or more appropriate Federal Student Loans with a combined
balance greater than $10,000. The borrower also must have left school,
graduated or must be attending school less than half the time.
Borrowers may have only one Federal Consolidation Loan application in
process at a time, and the loans must be in good standing, not in
default. The borrower's loans must also be in a grace period, deferment,
forbearance or repayment status at the time of application. Eligible
Federal Student Loans include:
- All Federal Stafford and Direct Loans
- Graduate PLUS Loans
- Federal Perkins Loans
- Health Professions Student Loans
- Nursing Student Loans
- Federal Supplemental Loans for Students
- Auxiliary Loans to Assist Students
- National Direct Student Loans
- Federally Insured Student Loans
- Federal Consolidation Loans
Graduate
PLUS Loans can be consolidated as soon as they are disbursed to the
school, while Federal Stafford Loans can be consolidated only after
graduation. A borrower with a subsidized or unsubsidized Stafford
Loan must be consolidated with the government's Direct Consolidation
Loans Program.
Consolidating private student loans
Nearly any federal loan can be consolidated, but private loans cannot be
consolidated using federal guidelines. However, private loan
consolidation can be obtained. Private lenders are competing for your
business and may offer borrower incentives, such as cash back, reduced
rates and principal reductions.
To consolidate graduate student loans through a private lender, you will
need to have proof of good credit or apply with a reputable
co-borrower. Private loan consolidation may require a minimum loan
balance, but private lenders tend to be more flexible than federal loan
programs.
You have four main ways to repay your private, consolidated
graduate-student loans. The standard plan involves fixed monthly
payments for up to 10 years. The extended plan allows borrowers to
extend the length of a loan up to 30 years, but each lender's repayment
terms will vary, often depending upon the balances of your loans.
Meanwhile, graduated repayment is tailored for the borrower who will
require lower payments for the first few years and can make higher
payments afterward. If you choose a graduated repayment plan, you should
be aware that time you take off from paying on the principal of the
loan will likely increase the total amount of your loan.
Income sensitive/income contingent repayment plans are quite rare and
are offered only to borrowers whose income will be small. Lenders base
payments upon the monthly income and employment status of the borrower,
the amount borrowed and other factors. Payments are adjusted annually as
the income of the borrower changes.
Things to consider
Before consolidating student loans, figure out how many loans you have
and whether they are federal or private loans. You should also determine
where you are in the repayment process, like whether you are in a grace
period. If the loans are in default, you will be unable to consolidate
them.
You should also consider your total number of lenders, and should take
stock of the other monthly financial responsibilities you face. If using
a private lender, you should be sure to consult one of your lenders for
guidance before consolidation. Private loan consolidation allows for
borrowers to shop around for the best deal, while federal loan
consolidation must adhere to government standards.
Many benefits result from student loan consolidation, including the fact
that consolidating student loans can stretch the repayment term and
reduce monthly payments by as much as 51 percent. The repayment period
could be extended to as long as 30 years, and consolidation can provide
borrowers with low interest rates and give them the ability to make
payments to a single lender.
However, before signing on any dotted line, borrowers should be aware of
the drawbacks of consolidating student loans. As you extend your loan
period length, you are adding to the total cost of the loan, since you
are being charged interest for a longer period of time. If rates
decrease, borrowers who have gone through the consolidation process
cannot benefit from a break in interest rates because they are locked
into a fixed rate. In addition, consolidation can cause borrowers to
lose their benefits on unconsolidated loans.
If you are considering consolidating your graduate student loans, you
are not alone. According to the education funding company NextStudent,
4,653,000 former students consolidated Federal Student Loans through the
Federal Family Education Program during the past three years. Once you know your options and have reviewed your financial outlook, you can decide whether you will become a part of that figure.
Resources
It's important to remember that policies change. Make sure you research
your options carefully. These links will help you get informed:
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