Loan debt can mount throughout a college student's time in school. In addition, it can originate from various lenders, and each loan may have a different interest rate or repayment schedule, causing confusion and stress. Many students consolidate these loans with one lender to simplify life after college, making repayment easier. However, choosing the right rate when consolidating is as important as repaying the loans. By following a few tried-and-true methods in your search for a consolidation lender, you can save time and money in lower interest rates.
Repayment Penalty
Go to the Department of Education's website and search for black listed loan consolidation companies who charge a large early repayment penalty. Get a list of reputable companies, and visit each website for fine print rules and regulations. Look for consolidation loans that do not enforce a penalty for early repayment. Many loan consolidators will offer low interest rates, but they will charge a large fee for early repayment of the loans. Look closely at the repayment guideline, usually found in the fine print, to determine the penalties. If you are still unsure, then call the company or speak directly with your financial aid counselor at your school for direction.
Variable Versus Fixed
Seek out loan consolidators that offer clear language and descriptions on fixed fee and variable interest rates. The US Department of Education lists statistics on national averages of fixed and variable interests for the year. Many loan companies offer fixed fee interest rates that may be more costly in the end, and some will offer variable rates that may benefit you in the future. For example, the low limit for the variable rate may be low enough to save you thousands of dollars in the end, while the high end of the fixed rate may be more costly up front.
Rewards
Look for companies that offer rewards for things such as prompt payment or automatic draft payments. These rewards can stack up and save you thousands in the long run. Sallie Mae or Nelnet has been known to offer loan forgiveness of partial amounts of student loans in exchange for various commitments from the borrower. Look for specials with each loan provider However, do not exchange benefits for higher interest. The loan companies should be in place to benefit you as the borrower rather than making extreme profits.
Reputation
Avoid consolidating with companies that contact you first, unless those companies are reputable and verifiable. The Better Business Bureau has a list of businesses with a reputation for seeking out unsuspecting students. In addition, obtain a list of reputable loan consolidators from your schools financial aid office or visit the Department of Education's website for a listing of consolidators with whom the government is familiar. Many loan consolidating companies seek personal profits at your expense. Seek out options through your school's financial aid office or browse the Department of Education's website to gain valuable insight into the consolidation process and to get ideas on possible providers. If you have been directed to a specific lender through your school or a government representative, then you should be able to trust the information.
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