Private Education Loan Consolidation - 3 Tips.txt by diyankusuma


In the United States the Federal Direct Student Loan Program (FDLP) include consolidation loans that allow students to consolidate Stafford Loans, PLUS Loans, and Federal Perkins Loans into one single debt. This results in reduced monthly repayments and a longer term for the loan. Unlike the other loans, consolidation loans have a fixed interest rate for the life of the loan.

Interest rates and payments

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.


The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).[3][4]

In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP.

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Private Education Loan Consolidation - 3 Tips

Whether you attended a public or a private college or university, you probably owe tens of
thousands of dollars or more in student loan debt. If you are like millions of other graduates, you
chose to fund your education with private student loans.

Private student loans differ from federal loans in that the private loans are issued by private banks
and other lending institutions. Private loans may be offered at variable or fixed rates and come
with a range of possible repayment periods (terms) like 5, 10 or more years.

If you have multiple private loans, you may be interested in consolidating your loans into a single
private consolidation loan.

Advantages To Loan Consolidation

The main benefit of consolidation is that it gives you the opportunity in most cases to reduce your
monthly payment obligations. Being able to save money each month on student loans offers a
huge benefit to graduates who hold a lot of debt. Most graduates - especially those in their 20s
and early 30s - are busy trying to pay their monthly expenses while building a small nest egg. High
loan payments but a serious damper on that goal.

Another benefit of consolidation is the opportunity to simplify one's financial life. Having to make
multiple payments to different banks each month - which are due on different dates and in different
amounts - is no piece of cake to manage.

Comparing Private And Federal Consolidation Options

Note that if your current student loans are federal loans, you should opt for federal consolidation.
Otherwise, private consolidation is the way to go.

3 Tips For Private Education Loan Consolidation

If you are considering consolidation, here are 3 tips for you to consider:

1. Shop The Best Bank Rate: Just shaving a point or two off of your interest rate can save you a
lot of money in your future consolidation loan payments. It is always worth it to spend a bit more
time now shopping the rates from multiple lenders before settling upon one.

2. Check Each Company Out: Do research on each lender to make sure they are viable and
represent a company you would want to do business with. For example, ask these questions: Do
they have the ability to service your loans? Do they allow for easy online application? Are their
repayment plans simple and easy to understand? Do they offer any benefits to borrowers who pay
on time? Keep meticulous notes about each lender you evaluate.

3. Get The Payment Terms You Want: Before contacting lenders, make sure you know what your
idea payment terms are. Remember: a longer term of, say 20 or 30 years means lower monthly
payments now but much more paid over the life of the loan in interest costs. Tip: choose the
shortest term possible while still leaving you with a monthly payment you can afford now.

Follow these 3 tips to a more successful loan consolidation.

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