Managing multiple student loan payments can be difficult.
A consolidation loan allows you to combine your student loans into one loan, leaving you with a single monthly payment. Although it's easy to qualify for a federal loan consolidation program, consolidating private student loans involves meeting numerous eligibility requirements. Different from federal loan consolidation, which offers a fixed rate, a private consolidation loan generally has a variable interest rate. Since loan consolidation programs vary, it's important to get all the facts from a lender before making a choice.
Instructions
1. Review your student loan agreements to get the name of the lender who services each of your loans. Verify each loan's term length. If you are looking for a way to lower you monthly payments, a consolidation loan gives you the option of choosing a longer repayment term in addition to securing a lower interest rate.
2. Contact your lenders to find out the interest rate you are currently paying on each of your loans. Consolidating your federal student loans will allow you to make the change from variable rates to a fixed-rate loan. The rate varies, but it will not be more than 8.25 percent. A lender fixes the interest rate at the weighted average of your loans at the time you consolidate. The average is rounded up to the nearest 1/8 of a percent.
3. Look into government consolidation loans, which offer lower interest rates. With federal consolidation, there is no credit check, no minimum loan amount required and you don't have to pay additional fees to get the loan. You may even qualify for some federal consolidation loans if your current student loans are in default. Unfortunately, you can't consolidate private students loans under a federal consolidation program.
4. Consider carefully the interest rate a lender offers you, especially if you have federal student loans that were made after July 1, 2006. These loans already have a fixed interest rate. Also, the interest rates are lower on subsidized loans made after the year 2008; therefore, you might not save much money in interest by consolidating your loans.
5. Learn more about the repayment plan options a lender has available. Calculate how much your monthly loan payments will be if you consolidate to determine if loan consolidation will decrease the amount you make in loan payments each month. Look for repayment terms that will meet your particular financial situation and lower your payments. If you can afford it, ask for the shortest repayment period the lender allows. Rates generally are lower on short-term loans.
6. Compare what several student loan consolidation lenders offer before making a final decision. Loan consolidation programs vary by lender. In addition to comparing rates, identify the repayment periods, loan limits and any borrower incentives that each lender offers.
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