Consolidating Student Loans

Consolidating student loans is rolling all of your loans into one loan. The rate of the loan is the weighed average of the specific loans that go into it and then it is rounded up to the nearest 8th of a percent. The consolidation is generally possibly only for loan balances of the amount of 7500 dollars or more and this depends on the individual financial lender. There are no fees for the consolidation.

For students that are presently in school you must ask your lender how to consolidate your student loans. In the past federal direct loans could only be consolidated if presently attending school but there has been a loophole, which was discovered by financial aid expert Mark Kantrowitxz, which showed that bank based Stafford loans can also be consolidated as well. In consolidating a loan that is bank based you must ask the financial lender to put the loan into a status of repayment. Most lenders will grant this request but if they don’t consolidation is not possible. After the request you must ask for a “in school referral” of repayment that means that after graduation you must pay the loan back. There is a drawback to doing this according to Kantrowitz in that the regular 6 month grace period is lost after you graduate. Consolidation is an advantage for practically all students presently in school because the low rate that you will be locked into can save more money than the worth of the grace period that is lost. The 2 percent reduction in the interest rate can save about 1100 dollars on a 10000 dollar loan. To consolidate a direct loan from the federal government just ask the government lending program.

For consolidating student loans if you have already graduated there are ways to go about it. If you have graduated and left school and your loan is a Stafford loan you have to inquire to your lender to consolidate the loan. If you have several financial lenders which you have taken loans from you can go to any one of them to ask for consolidation. If the one lender that you go to says no to your consolidation request go to another lender. If your loan is a federal one you have the possibility to go to any lender. For help in consolidation you can go to the financial aid office at your educational institution, recommended financial lenders, or look on the list of the biggest lenders on the site of financial aid expert Mark Kantrowitz which is www.finaid.org.

It can be worth your while to shop around but beware of discounts for borrowers who pay on time. As an example there are some financial lenders which offer a single percentage point discount on the interest rate after you are on time for your payments 36 times in a row. But there are not many borrowers who are eligible for these kinds of discounts. It is also important to know that many lenders usually offer a discount of a quarter of a percentage point on the interest rate if the borrowers pay by electronic funds. This can be done by transferring funds directly from a checking account.

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