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Nowadays, the cost of higher education is becoming more and more expensive. Some families may not be able to send their son or daughter for further education. Getting student loans will help.
There are 2 broad categories of student loans available. Government Student Loans and Private Student Loans
Government or federal student loans are funded and administered by the US Department of Education. It is classified under the Federal Student Loan Assistance Program. They have very few requirements other than studying at your American college or university. International students may also apply, although approval is granted on a case-by-case basis.
The Student Loan Assistance Program disburses about $60 billion each year, so it’s a great option for getting student loans from the government. Thus the interest rates are very low.
Private student loans are funded and administered by banks and other financial institutions. These lenders offer student loans at higher interest rates than federal student loans. Some common student loans available are from Citibank and Sallie Mae.
You are allowed to apply for both private and federal student loans for your education needs, although I would not recommend it.
For some students who have a few student loans to repay concurrently, this can be a financial drain on their family’s finances. That’s where student loan consolidation comes in.
Student loan consolidation basically consolidates all of your student loans into one loan so that it is easier to pay off and manage. When you are getting student loan consolidation from the government or the private market, your existing student loans are paid off and erased by the student loan consolidation lender. The balance is transferred to the new student loan consolidation. Thus you start a new loan and need to make only one payment every month.
There are many advantages to using student loan consolidation. Interest rates will be lower as it takes the average interest rates of your previous student loans. Thus the maximum interest rate cannot exceed 8.25 per cent due to government legislation.
Single student loan becomes very easy to manage and repayment becomes easy. Repayment options are quite flexible. For federal student loan consolidation, you can choose to begin repayments after you graduate from school. There are many other options as well.
Another beneficial side effect of student loan consolidation is that it can also improve your credit score. Since you are effectively clearing out all your old student loans and taking out a new one, your credit score will go up and this is important if you plan to take out other types of loans in the future.
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