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Student Loan Consolidation FAQ
By Roshan Tolani
 
What are the advantages of student loan consolidation?
  • It simplifies the loan repayment process.

  • It reduces the amount of your monthly payment and saves you from possible interest-rate variations in the future.

  • It gives you more time to repay your loans and prevents your credit report from showing outstanding loan amounts.
Do I need to have a minimum amount of debt to consolidate?

Minimum amount requirements for consolidations vary depending on the lender. While the Federal Direct Consolidation Loan Program does not require a minimum balance for consolidation, some lenders insist on minimum balances ranging from $5,000 to $7,000.

Will consolidation affect my credit rating?

Yes. Consolidating your outstanding student loan debt helps you improve your credit score. One loan looks better than several unpaid loans.

Will consolidation help me save money?

Yes. You can save money through consolidation because:
  • it allows you to lock in a low interest rate.

  • many lenders offer consolidation loans with lower interest rates.

  • some lenders offer loan discounts when you sign up to have monthly loan payments electronically debited from your bank account.

  • some lenders offer interest-rate reductions for making on-time payments.
Whom should I approach if I decide to consolidate my loans?

It is more sensible to first approach the lender currently holding your loans. As your current lender already has all the paperwork, the process will be simpler. Secondly, the offer will serve as a baseline against which you can compare other lenders' offers.

Should I continue to repay my loans while my consolidation application is being processed?

You should continue to make your loan payments until you receive a notification saying that your loans have been paid off. Do not go into default on your loans, as this will halt the progress of your consolidation loan application's processing.

Can parents consolidate PLUS Loans?

Yes. In fact, they should consolidate PLUS Loans because consolidating will reduce their interest rates.

Can I consolidate my federal and private educational loans together?

It is not advisable to consolidate private loans and federal loans together. Although some lenders offer such consolidations, doing this will increase your interest rates and take away many of the benefits of federal educational loans.




 


Article Title : Student Loan Consolidation FAQ
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