School Loan – Student Loan USA

Why Should You Consolidate Your Student Loan? : Article Body:
If you have just completed college, then chances are you are facing a mountain of student Loan debt, and may feel there is no way out.  You may be wondering if there is a solution or end to this nightmare.  One way of dealing with this situation is to consolidate your student loan. To consolidate your student loan to a fixed rate can be substantially better, reducing your regular payments by more than forty percent.  It may also be possible to stretch the term of your payment hence reduce your monthly outgoing.  The main disadvantage when you consolidate your student loan within the six month grace period is that you must start making your payments immediately.  This can be extremely awkward if you haven’t yet a job outside of graduation.  You can wait to consolidate your student loan just before the end of the grace period, and still receive the lower rates.  But remember once you have consolidated your student loans you cannot un-consolidate them, so consider your choices before committing yourself.

Why Should You Consolidate Your Student Loan

How is interest calculated when I Consolidate Student Loans?
When you come to consolidate your student loans, the lending firm pays off your government loan and issues you a new loan under its own name.  The typical way to determine the interest rate on the new loan is to take the average interest rates on all of the student loans, and offer a new rate that is an eighth of a percentage point higher (up to a maximum interest rate of 8.25%).  Although agreeing to a higher interest rate might not sound like a good reason to consolidate student loans, this rate is fixed over the life of the loan, whereas the government rate will fluctuate.  Since rates are at an all time low at the moment, locking in the current rates might be a good idea. Furthermore, many banks give you ways to bring down the percentage rates.  For example, some lending institutions will drop the rates by as much as a quarter point if you agree to automatic deductions from a checking or savings account, whereas others drop the rates after a certain number of timely payments.  As an additional bonus, there is no penalty for paying off your consolidated loan early.

There are alternatives to consolidating your student loans.  Before you decide to consolidate you should carefully consider them.  Did you realize that it is possible to have your student loan cancelled altogether?  Your student loan may be cancelled if you choose to become a volunteer for the peace corp., or work for the government in a low-income area as a teacher or doctor.  Cancellation however, is not possible once you have consolidated your student loan.
Another time to hesitate prior to choosing to consolidate student loans is when you are close to completing your payments.  Increasing your payments and saving yourself some interest and the hassle of consolidation may be more advantageous.

When Should You Consolidate Student Loans? If you have just graduated from college, the likelihood is that you are under a large amount of debt in the form of student loans.  You might be wondering if there is any way to reduce the amount you have to pay.  One solution for reducing your debt is to consolidate your student loans.  Student loan consolidation is similar to refinancing a house on better terms:   although the principal of the loan will not be affected, the interest rates you can lock in when you consolidate student loans to a fixed rate can be substantially better, reducing your monthly payments by up to forty percent.  Plus, you might be able to stretch out your payment time to reduce your monthly payment amount even further.  The disadvantage when you consolidate student loans during your initial six-month grace period is that you must start making your payments right away.  This can be difficult if you have not found a job after graduation, although you can wait until just before the grace period ends to consolidate, and still receive the lower rates.  Furthermore, once you have consolidated your student loans, you cannot un-consolidate them again, so make sure to consider your choice carefully.

When Should You Consolidate Student Loans

How is Interest Calculated When I Consolidate Student Loans?
When you consolidate student loans, your lending company pays off your government loan and issues you a new loan under its own name.  The typical way to determine the interest rate on the new loan is to take the average interest rates on all of the student loans, and offer a new rate that is an eighth of a percentage point higher (up to a maximum interest rate of 8.25%).  Although agreeing to a higher interest rate might not sound like a good reason to consolidate student loans, this rate is fixed over the life of the loan, whereas the government rates will fluctuate.  Since rates are at an all time low right now, locking in the current rates might be a good idea.  Furthermore, many banks give you ways to bring down the percentage rates.  For example, some lending institutions will drop the rate by as much as a quarter point if you agree to automatic deductions from a checking or savings account, whereas others drop the rates after a certain number of timely payments.  As an additional bonus, there is no penalty for paying off your consolidated loan early.

When Would You *Not* Want to Consolidate Student Loans?
Before you decide to consolidate student loans, you should carefully consider your alternatives.  For example, did you realize that it might be possible to have your student loan cancelled altogether?  Student loan forgiveness options include volunteering, for the Peace Corps for example, or working for the government in a low-income area as a teacher or doctor.  Cancellation is not possible, however, after you have consolidated your student loans.  If this kind of work interests you and is available, it could be a better option than loan consolidation. Another time to hesitate before you choose to consolidate student loans is when you are close to finishing your payments.  Stepping up the payments and saving yourself some interest and the hassle of consolidation might be more advantageous to you.
Finally, there are loans that you might want to keep open because they offer special advantages.  For example, if you are considering going back to school and you have a Perkins loan, you would not want to consolidate that with your other student loans.  The government will pay all interest on Perkins loans while you are in school, but if you have chosen to consolidate student loans, you will not be able to receive this benefit.  You could always choose to leave any special kinds of loans out of the consolidation mix, however.