Federal student loan consolidation

Federal loans usually cost less than student loans from private lending companies but if you have several loans you need to pay off and not enough income to cover monthly payments as well as your other living expenses then federal student loans can also be a heavy burden.

If the few hundreds you save monthly can take you far, then you can decide to have these loans consolidated. Not only will you save money monthly on the consolidation, you will also have an easier time managing your credit and your finances.

All your federal loans must be in repayment or under the grace period for it to qualify for loan consolidation. Most loan consolidators offer consolidation on the following federal loans: Stafford loans, PLUS loans, Perkins loans, National Direct Student loans, Health Professions Student loans, William D. Ford federal direct loans and others. Standard consolidation features apply to these loans. The most common feature is the reduction of monthly fees by extending the repayment term. Loan consolidation also offers flexible repayment plans, fixed interest rates, and no repayment penalties when you decide to pay above the minimum amount due. Many companies also offer additional discount when you apply the loan on an auto-debit facility with your savings account. Companies also offer improved terms when you pay your monthly dues on time for a certain period. Some consolidators deduct 1% from the interest rate when a client has made 36 on time monthly payments. The discount usually applies until the end of the loan’s term or until a client defers payment. Not all loan consolidation service providers offer incentives and additional discounts for on-time payment so verify with the company. Additional incentives should help you decide on which consolidator to go for. But remember, study all aspects of the loan consolidation from interest rates to the total payments that will be made.

Study the packages being offered by consolidators because federal loans come with very low interest and consolidating them will mean you end up paying more interest if you add up all the interest charges. Also, make sure to consolidate federal loans separately from private student loans. You might end up being charged higher interest because of the increase in the amount of the principal loan. You don’t want your private loans causing an increase in interest charges on your federal account.

If your loan is already in repayment period then you must continue paying your monthly fees until such time your loan consolidator informs you that your federal consolidation loan has been funded.

If your loan has already been consolidated and you still find yourself a little cash-strapped and unable to pay the monthly installments then there are still forbearances available to assist you. Make sure you contact your service provider to know more about payment deferments. Of course, the ultimate goal is still to be able to pay your fees on time and to slowly pay off your debt so make sure you choose the right repayment terms for you.