Friday, 19 April 2024
Every student goes through the same phase of education loan debt after their graduation, and trust me if you think that you’re the only one then you’re not.
Most of the times students find it difficult to pay off their student loan debt and at that point comes in the concept of Debt Consolidation and Debt Refinancing.
But before we begin with your debt settlement plan, you first need to understand the basic concept and the difference between the two.
It’s common to have a mix of Federal and Private Loan after school. You can easily have multiple loan services, due dates and minimum payments.
Keeping a track of what you owe every month and when it’s due can be very confusing.
In such cases, deciding to consolidate student loans could help you manage your debt more efficiently.
Although some people use these terms “consolidation” and “refinancing” interchangeably, they’re very different.
So, it’s important to first understand the difference between both.
|
What it Does? |
Consolidation combines multiple federal loans into one federal loan |
Refinancing combines private and federal loans into one private loan |
|
Will it Reduce your Interest Rate? |
No, it won’t |
Yes, it will |
|
Will you Save Money? |
No, Consolidation does not provide you the facility of reducing your interest rate so, you can’t save money |
Yes, you can definitely save money with Refinancing |
|
Which Loans can be Combined? |
Only Federal Loans |
Both Private and Federal Loans |
|
Will you have to pay just one monthly bill? |
Yes |
Yes |
Before addressing various questions related to this topic, check out a few options available for Consolidating your Student Loan.
Here we are providing you with the best banks offering the best rates.
| APR:
Fixed: 3.89% – 7.89% |
Available For:
Graduate and Under- Graduate |
Let's Start
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| APR:
Fixed:3.89% – 7.97% |
Available For:
Graduate and Under- Graduate |
Let's Start
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| APR:
Fixed:3.67% – 7.25% |
Available For:
Graduate and Under- Graduate |
Let's Start
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| APR:
Fixed:5.13% – 8.97% |
Available For:
Graduate and Under- Graduate |
Let's Start
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| APR:
Fixed:3.9% – 9.99% |
Available For:
Graduate and Under- Graduate |
Let's Start
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| APR:
Fixed:3.5% – 7.02% |
Available For:
Graduate and Under- Graduate |
Let's Start
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| APR:
Fixed:5.74% – 8.49% |
Available For:
Graduate and Under- Graduate |
Let's Start
|
Even after understanding the basic concept of Consolidation and Refinancing, there still are various unanswered questions.
Before opting for Loan consolidation, you need to understand whether this solution is even required in your case or not. There might be a few cases of debt where consolidation might not work.
You will be needing the help of Student Loan Consolidation when:
If you have any previous federal loans, then your interest rates might be variable.
This means that the interest rate will change according to the market condition, which sometimes might prove heavy on your pocket.
So, if you want the stability of a fixed loan rate with steady payments, then you should go ahead with getting your student loan consolidated.
Once students graduate, they are automatically enrolled in a 10-year standard repayment plan. So, if you can’t afford this payment, then consolidation will help you.
In this case, you will have to take a Direct Consolidation Loan where you can extend your repayment term for up to 30 years, which will help you in reducing your payment in the initial stage of your career.
If you are refinancing and consolidating your loans through a private lender and not through the Federal government then this means that you are taking a private loan;
Hence, you will no longer be eligible for federal repayment options that might help you out during tough times, such as Public Service Loan Forgiveness or income-driven Repayment Plan.
Most of the private lenders don’t offer these same plans, though some banks might grant you forbearance (or temporarily pause your payments) during a time of financial hardship.
So before turning any federal student loans into a private student loan through refinancing, make sure that you’re confident about your ability to keep up with the repayment, as you’ll lose all access to the federal protections.
And if any other question of yours is unanswered then please leave your questions in the comment section.
When to consider Federal Student Loan Consolidation?
What all are the student loans that can be Consolidated?
How to Consolidate Federal Student Loans?
Are you eligible for a Consolidation Loan?
Do you have to consolidate all of your loans?
How much loan amount can you consolidate?
Which all are the loans that are NOT eligible for Consolidation?
Can you consolidate the loans that you have previously consolidated?
Can you add a loan to your consolidation loan once it has been approved?
Can you change your mind and reverse loan consolidation after it is complete?
How long will it take to get your consolidation loan?
How is your interest rate determined?
What is the difference between a Fixed Interest Rate and Variable Interest Rate?
Is there any Auto Debit Reward?
Can you consolidate your loan while you are still in school?
Is there any penalty for paying off your loan early?
You only need to go with the option of Federal Student Loan Consolidation:
According to the U.S. Department of Education, most of the federal student loans can be consolidated, including:
Please Follow the Step by Step process mentioned below:
In order to qualify to get a Consolidation loan:
It is not necessary, you can choose to consolidate one, some or all of your loans which are eligible for consolidation according to the loan terms.
The minimum consolidation amount is $5,000 and the maximum limits may apply according to your bank’s terms.
Mentioned below are the loans that are Not eligible for consolidation:
Yes, if the loans that you consolidated previously were used solely to pay off qualified higher education expenses and they meet the minimum loan amount of $5,000 then you can include these loans for consolidation.
No, once you have received the approval disclosure and accepted the loan term, then no additional loans can be added to it.
But still, if you need to add a loan, then you can cancel your existing application and re-apply with the additional loans.
Yes, you will be having 30 days from approval disclosure to accept the loan terms and a three-day “right-to-cancel” period, following the Final Disclosure, before the consolidation is complete.
It can take around 30 to 45 days to process your loan once you have applied for it.
Firstly, the credit review process is completed where you and your co-signer (If Applicable) will sign the loan document and you will need to obtain the payoff statements from your current loan service provider.
Once these steps are completed, you will be notified when your loans are consolidated and you will be provided with the new minimum monthly payment amount and due date.
You need to continue making your monthly payments until you get notified that your consolidation loan has been disbursed.
If you apply with a creditworthy co-signer then there are chances that you receive a lower interest rate.
It is always advisable to co-sign with a person with good credit history.
Your interest rate will be based upon:
A Variable Interest Rate may change quarterly during the life of the loan, depends on the change in market condition. This may lead to an increase in monthly payment or an increase in the total number of payments.
A Fixed Interest Rate is set at the time of the application and does not change during the term of the loan.
Yes, you can get Interest Rate DEDUCTION when you enroll yourself in automatic payments during your repayment term.
But you need to check with the bank whether they provide this facility or not as only a few banks have this facility.
Yes, you can get your loan consolidated while you are still in school, during your grace period or after your grace period expires.
But if you choose to consolidate your loan while you are still in school or during your grace period, then you will lose any remaining grace period on the loans that you are consolidating.
In this case, you will begin making payments approximately 30-45 days after your loan is disbursed.
No, there is no pre-payment penalty.
Making these additional payments can help you in lowering the total cost your loan.
Source: https://www.everybuckcounts.com/consolidate-and-refinance-your-student-loan/
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