Student Loan Consolidation 2021
Getting an education is an expensive endeavor, and afterward, whether you graduate or not, repaying the loans you took out can prove to be quite challenging.
Before you default, or ask for forbearance, or go as far as bankruptcy a common solution to help make your loan payments more manageable is student loan consolidation. What is it? How does it work and how does it help?
What Is A Student Loan Consolidation?
Just like a regular debt consolidation, a student loan consolidation is when you apply to take out one bigger loan from a lender to pay off the total amount of several other loans.
Now, there are two types of consolidation.
When you apply for consolidation with a federal loan, you go through the Department of Education. This is done for free and you cannot use the Department of Education’s consolidation program on your private loans.
After you consolidate the Federal loan, you’ll be set up with a loan servicer. The loan servicer will help you manage your repayments, which can be anywhere from 10-30 years.
A loan service may be able to help you qualify for the Student Loan Repayment Program, which is based on a percentage of your income, or even the Student Loan Forgiveness Program. For more details about federal loan consolidation, check out: Federal Loan Consolidation
2. Private Loan:
Private loan consolidation is usually considered “refinancing” and it doesn’t apply for the same benefits that you get through the department of education. You’ll apply to a lender like Citizen Bank or Sofi, to refinance something more manageable.
Pro’s of Consolidation
Fixed interest rates
Lower monthly payments
Federal consolidation can lead to forgiveness
No minimum or maximum amount requirements
Cons of Consolidation
- More interest accrues over the years.
- Can only consolidate your loan once, stuck with the interest rate you agree to.
Who Can Help You?
As noted above, the Department of Education is your first place to start for a Federal Loan but what about your private loan?
Before you pick a lender, you’ll want to consider a few things:
- Loan amount
- Loan period.
- Interest rates (3-5% annual percentage rate)
- Credibility: Are they accredited, do they have reviews? What are fellow borrowers saying about their services?
- Low to no fees: late payment fees and origination fees are standard. Do not accept anything otherwise.
Sofi is a popular choice for many borrowers and on average can save a student of $17,000. Their annual percentage rate is between 3.25-7.24%, with terms between 5-20 years. There is no maximum amount of a loan but a minimum of $5,000.
For more information on refinancing your private loan, check out their eligibility guidelines on their website: Sofi
The Final Word
consolidation of your loans may not make sense for you. The best thing to do is to have a student loan. Gov. if you choose to apply it, then you have an option. For private loans, you may need a credit score of 600 or better and a good job to even be considered.
Read More: All About consolidation Student Loans
Read More: Student Loan Consolidation
By taking into account the information above, and doing a little more research, consolidation could save you from aggravation and make paying off your educational costs much more manageable.