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Student loan consolidation is a way for graduates to combine all of their student loans into one loan. This debt is handled by a creditor. The creditor pays off multiple loans in full, leaving the student to pay for a new loan. Students no longer need to pay off multiple student loans with different billing cycles, dates or interest rates. They now have a debt and an interest rate to pay to a creditor.
When considering debt consolidation. You should do research. Before looking for a debt consolidation company or program, first learn the terms of the agreement, monthly payments and interest rates for each loan and creditor. When selecting a company or program, be sure to compare them; Know the terms of their agreement, interest rates and obligations. Once you have carefully selected a company or program that you think is a good fit for you, provide them with the information that you gathered.
There are federal and private student loan consolidations. Federal student loans allow a student to combine all of their federal loans into one new loan.
The government provides federal programs such as:
o Federal Family Education Loan Program (FFEL). FFEL will soon be replaced by the Direct Loan Program and Pell Grants and the Federal Direct Student Loan Program (FDLP). These programs allow students to get their loans from Stafford loans, federal Perkins loans and PLUS loans combined into one federal loan. These are fixed-rate loans backed by the US government, offered to students and parents.
The Federal Direct Student Loan Program (FDLP) was created by the US Department of Education in an effort to assist parents and students with their loans.
Private loan consolidation is combining private student loans into one new loan. The reason for applying for federal loans before considering private loan consolidation is to better maximize the federal loans available. Private companies like Sallie Mae recommend it.
Here are several federal loans:
Perkins loans
Perkins loans are funded by the government. They charge very low interest rates but are need-based, a financial officer will determine if a student is eligible.
PLUS loans
PLUS loans are for parents of graduate students. There are also PLUS loans for students. Payment on this scheme will start as soon as this loan is approved. PLUS loans allow you to take up to 10 years for repayment. Commercial banks and online lenders offer PLUS loans for both parents and students.
Stafford Loans
Stafford Loans offer low interest rates. They don’t raise their interest rates any more. Stafford loans do not require a student to pay any interest while in school and the loan is not required to be repaid in six months after graduation. It provides 10 years for repayment.
Here are some private companies that offer debt consolidation:
Direct loan approval
Direct loan approval offers interest rates as low as 3 percent. Reducing a student’s monthly loan debt by up to 60 percent.
SLM Corporation or commonly known as Sallie Mae. Sallie Mae offers a variety of options depending on the type of school or a student’s education program. Such programs include Federal Stafford Loans, Parent PLUS Loans, Graduate PLUS Loans, Sallie Mae Smart Choice Student Loans, Continuing Education Loans and Career Training Loans.
Citibank CitiAssist Undergraduate and Graduate Loan, CitiAssist Health Professions; CityAssist Residency, Relocation and Review Loans; and CitiAssist Law and CitiAssist Bar Exam Loans. Students receive a 0.25% interest rate reduction on their auto-debit payment program. These programs take 20 to 25 years to pay back.
Edfed is another private company. By choosing one of their plans, students can reduce their monthly payment by up to 60 percent. They also offer interest-only payments. The fixed interest on EdFed is a weighted average of the interest rates on a student’s consolidated loans, rounded to the nearest 1/8 percent.
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