To Consolidate Student Loan Debt

Consolidating student loans, like debt consolidation of traditional loans you can also opt for federal student loan debt consolidation.
Consolidation means your loans are bundled together into one new loan at a different rate of interest.
If you plan to consolidate your loans, do not include your spouse’s loan with yours. The danger of consolidating your and your spouse’s student loans is that if something happens to either one of you, your spouse will still be responsible for that loan. The burden of your private loan repayment would fall upon your spouse. This is where a life insurance policy beneficial, with your spouse as a beneficiary. This protects them from having to pay back your loan. Though there are no deadlines in federal loan consolidation programs, there are certain requirements that need to be fulfilled:
Your loans have to be fully disbursed to be eligible for Federal Consolidation Loan program.
You are no longer enrolled in school.
You are actively repaying your loan (including deferment or forbearance), or are in your six-month post-graduate grace period.
Your minimum consolidated loan amount is $10,000.
The best time to go for debt consolidation of your federal student loans is when you still are in your grace period, because of the lower in-school interest rate.
Every student has his or her reasons for going in for student loan debt consolidation, and so would you. These are some of the reasons why you should consider debt consolidation of your federal student loans:
Fixed rates of interest.
Lower monthly payments.
Payment incentives that save you money.
Single payment each month in place of multiple payments to different loan issuers.
New or renewed deferments.
You will need the following information when applying for consolidation of your federal student loans:
The balances and interest rates of your current eligible federal student loans.
The names and addresses of the companies that hold or service your federal student loans.
These are the companies that handle billing, collections, deferments, etc. of your current federal student loans.
The names and addresses of two personal references in the United States of America.
Federal government student loan consolidations have a fixed rate of interest.The fixed rate is calculated by the weighted average of the interest rates of the individual loans being consolidated. These are rounded up to the nearest 1/8 of a percent, up to the maximum of 8.25 percent.

The Disadvantages of Merging Your College Debts

College debt consolidation is such an attractive repayment option that a lot of borrowers fall for it. Before you go ahead and consolidate your student loans, it will help a lot to know the disadvantages of this refinancing action. What disadvantages are these?

1. Your borrower’s benefits are forfeit. There are benefits that apply only to individual debts like discounts on interest rates and rebates. Retaining these benefits could be enough to pay off your college debt’s low interest rates. You will very likely lose these benefits once your debts are merged.

2. Longer repayment period will increase the original cost of your debts. To accommodate lower monthly payment dues and interest rates, your repayment term will be extended up to 25 years. In the long run, you will end up paying more than the original amount you borrowed because you are paying longer.

3. Merged college debts are subject to pre-payment penalties. This may be true to some debt consolidating companies so you have to take care and not choose these types of plans. There are instances when you can pay your dues earlier than agreed, having to pay a penalty is an extra cost off your budget. You should also be wary of plans with default penalties.

4. Merging private and federal debts together is not an advantage. Private lenders have different consolidation terms from federal lenders. Federal loans have essential borrower’s benefits that may be lost if merged with your private debts.
You should also consider your personality before you consolidate your student loans.

Key Facts That You Should Know About Government-Backed Debt Consolidation Loans

Having said this, there are quite a number of government-backed debt consolidation loans which are readily available to the public.
The first thing you should know is that it is offered by the Federal Government in the United States for their people to settle debts in multiple accounts when they’re in really tight financial situations. Rather than invest in the services of a nonprofit debt consolidator which would cost a little, citizens can borrow a sum of money from the government at a very low interest rate to pay their creditors.
The payment is done by converting the individual’s current debt from unsecured loan to a secured loan with collateral. As education has taken its place of being one of the most important necessities in our lives, the most popular loans are study debt consolidation loans meant to help students get through their universities and higher education. The US Education department also offers loans to help students pay off previous federal education loans. Under The Higher Education Act (HEA), two loan consolidation programs, i.e. the Federal Family Education Loan (FFEL) Programs and the Direct Loan Program are offered to provide financial assistance to those people who are in need.
This government backed debt consolidation loan is the best thing out there for those who are looking for an economic hardship deferment, especially for those who are unemployed and don’t have a stable source of income. In a nutshell, there are many who’ve successfully used the loan to consolidate their financial troubles. Its trustworthy and worth the interest, so if you’ve got a debt or education on hold, get started on filling out the forms.