When you graduate you are given a 6 month grace period before you need to start making your loan payments. When you consolidate your own loans, you must waive any remaining grace period. This sounds like a bad thing but remember this isn't a "free period. " Your loans will continue to collect interest on the unsubsidized portions whether you are producing the payments or not. So while it's true that you are not necessary to make any payments for that six month period many students choose to so that their balances from growing.
You may also begin the consolidation process and choose to retain your grace period. Your application is processed and ready for funding but isn't actually funded until shortly before your grace period finishes. This is a good way to keep your grace period and never have to worry about forgetting to apply or not applying over time.
2. Lower Monthly Payments
All federal Stafford, PLUS and Graduate PLUS loans are issued having a 10 year term. This results in a high payment. When you consolidate your student loans, you can boost the term of your loan up to 30 years, greatly lowering your monthly payments.
There are good and bad aspects to upping your loan term, but they are completely under your manage. Increasing the loan term means you will pay more in interest in the long run IF you make the minimum payment for the life from the loan. However, since there are no prepayment penalties you can pay your student loan off anytime. The lower payments of a consolidation can be a great help in the first few years after graduation until your salary catches up with your own education. Once you have reached your full earning potential you can begin making larger payments which will reduce the term of the loan and keep your interest costs down.
3. Graduating
At this time federal law does not allow within school consolidations. This shouldn't have much impact on students since you aren't required to make loan payments while you are still signed up for school. It can be helpful to have a consolidation lender in your mind and your application process started before graduation though to provide you with one less thing to worry about in the busy months after leaving school.
4. Loan Forgiveness
Depending on which area your degree is in, you may be entitled to loan forgiveness. Laws and programs vary by state so you'll have to check your state's particular rules, but in general students who work in areas that serve the general public, especially in low income areas, are generally eligible with regard to loan forgiveness. Consolidation does not affect your ability to be eligible for a loan forgiveness with Stafford loans. Perkins loans on the other hand cannot be forgiven if they are consolidated. Be sure to discuss this together with your consolidation representative when considering student loan consolidation.
5. Quantity of Separate Lenders
You may find yourself with several various creditors upon graduation. Consolidating them all into one loan includes a few benefits. First, you only have to make one payment per month, making your loan easier to manage. Second, having fewer lenders can help your credit score.
5. Payment Plans
Generally your loans have a set payment plan that was established when you took them out which is usually just a flat payment for the life from the loan. Consolidation offers several different repayment options including managed to graduate payments, extended payments and income sensitive payments. Having choices causes it to be easier to make your scheduled on time payments.
6. Deferral as well as Forbearance
All federal loans have the benefit of three years of deferral and 3 years of forbearance; this doesn't change when they are consolidated. In fact, if you have used all of your deferral or forbearance it is renewed to 3 many years each upon consolidation.
7. Repayment Incentives
There are lots of lenders out there who offer many different repayment bonuses. Be sure that you weigh out all the options before you decide which company you will use. Make sure that you are getting the most savings in your consolidation. Buyer beware: lenders offering a cash back incentive generally give you smaller savings over time. Make sure that you weigh out all available plans before you decide which company you will be using.
8. Interest Rates
Many student loans are still on a variable rate and contains been steadily increasing over the last couple of many years. The only way to fix the interest rate on these loans would be to consolidate them. Since the interest rates have been climbing over the last few years it is advisable to consolidate before the rates increase again on July 1. When consolidating the interest rate is dependent upon a federally regulated weighted average of your loans current rates of interest. One thing to be aware of is if among your loans has a significantly higher rate it might throw off your other loans. Make sure your loan advisor goes over your interest rates with you to determine the easiest method to consolidate.
A consolidation is easy and free for a person. It requires no credit check or even employment. You will find few drawbacks to a consolidation and they can all be managed or avoided by dealing with a reliable, trustworthy loan advisor. Is it right for you personally? The best way to find out is to consult with a knowledgeable loan advisor who can go over your own loans with you and help you determine your best strategy.
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