In a Nutshell, Does Student Loan Consolidation Make Sense?

2. There is no cost to apply, there is no credit check required and when a federal consolidation loan has been completed there are no prepayment penalties. This means borrowers can pay off the loan at any time and at no additional costs.

3. Borrowers are able to lock in the interest rate on all variable rate federal student loans. This means the interest rate will not change over time and borrowers will have the comfort of always knowing the monthly payment – since it will not change.

4. Federal student loan consolidation allows borrowers to extend the repayment term on their loans. This allows borrowers to lower their monthly payment by up to 50% (or even more). Many borrowers find lower payments to be very beneficial when they just out of school even though extending the repayment term means paying more interest over the life of the loan (unless borrowers elect to pre-pay the loan early at no additional costs)

The decision to consolidate private student loans also can provide many attractive benefits to borrowers, including many benefits that are similar to federal student loan consolidation – ability to lower monthly payments and the ability to potentially obtain a better interest rate.

A. Once a borrower has graduated from college, they are frequently considered by many lenders to be a better credit risk (vs. those who have not completed their course of study). As a result, many lenders offer more favorable interest rates to borrowers who have graduated.

B. Private student loan consolidation also offers the ability to extend the loan repayment term which frequently results in a lower monthly payment – many times significantly - when compared to the borrowers existing loans.

C. Most private student consolidation loans also offer no pre-payment penalties which means that borrowers can pay off their loan balance any time they feel comfortable – and at no additional expense to them.

D. Finally, private student loan consolidation offers the ability to roll all existing private student loans into a single loan with only one monthly payment to only one lender.

Posted by: Fundamental Administrator

2/22/08