Pondering how to consolidate federal student loans? Student loan consolidation can require a lot of research and paperwork, but it is easier than you think. Student loan consolidation is really a simple process. This loan consolidation takes all your active student loans and bundles them into a single loan account with one payment per month. As such, you may lower the monthly payment amounts and length of the loan with a student consolidation account. If you learn how to consolidate federal student loans, you can manage your finances with a single loan account while saving money at the same time.
In addition, there are many student loan options available to consolidate outstanding loans. Before consolidating your loans, know the eligibility and loan requirements that affect your options.
Know if you’re eligible to consolidate.
Eligibility requirements vary based on the lender, but here are the most common ones.
- U.S. citizenship.
- Student loans are not in default. If you have defaulted on a loan, payment arrangements must be made before a consolidation can be done.
- Your federal loans meet the eligibility criteria.
- Total outstanding federal student loans should have a balance of at least $7,500 on average. However, some lenders may consolidate lesser amounts.
- You can no longer be enrolled in the educational program for which the student loans covered, if you want to consolidate them. Student consolidation loans are an option for students that have either dropped out or graduated.
Learn which loans can be consolidated.
Almost all federal loans can be consolidated. While most private student loans can be consolidated, federal consolidation guidelines are not followed. Here is a list of specific students loans that can be consolidated:
- Ford loans or direct student loans.
- Direct parent loans for undergraduate students.
- Stafford loans.
- Perkins loans.
Know the difference between private and federal consolidation.
You may only use federal consolidation loans to refinance federal student loans. On the other hand, private consolidation loans are used to only refinance private student loans. The main difference between private and federal consolidation loans is the way that the interest rates are calculated. For example, federal consolidation loans follow a federal formula with fixed rates and private consolidation loans usually follow the market’s rate, which can be variable or fixed.
Furthermore, if you have both types of loans and consolidate them, keep them separate. This way, you avoid consolidating a federal loan under private lender terms with higher rates. If you consolidate under private lender terms, be certain to check the loan’s terms and conditions to avoid paying more than before.
Consolidate your student loans based on the lender conditions offered, like monthly payment amounts and repayment periods. Once you know the basics of student loan consolidation, it is easy to get the best choice for you. Choose from a wide range of loan options to start saving money and properly managing your finances.
This article is provided courtesy of CreditSeason.com, a consumer finance website providing information and tools on bad credit loans and other personal credit services.