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School Loan Consolidation
The Basics of School Loan Consolidation
A student loan for college education is a great way to pay for higher education and there are many benefits given to students. There are private student loans and federal student loans depending on what you are looking for. The downside of student loans is that when graduation many have a lot of debt because of the loans they have taken out for school. Considering that higher education is very costly many people take out more than one loan to pay for it. To make these payments, to different lenders, easier you can look into school loan consolidation.
School Loan Consolidation – a Definition
School loan consolidation is putting all of your student loans into one loan where you only have one payment plan. When using school loan consolidation the balance of the student loans you currently have are paid off and the remaining balance is rolled over into one consolidation loan. Basically it is just adding all of your student loans into one loan for repayment. This is an easy refinancing tool to make repaying the loan easier. It can be difficult keeping track of all of the loans you have taken out for college and by school loan consolidation it makes it easier to keep track of. Consolidation can be done with both private and federal loans.
The Benefits of School Loan Consolidation
School loan consolidation will lock in a fixed interest rate for the term of the loan, which is generally lower. This way you can save money over the term of the student loan. Consolidation also will lower your monthly payment and combine them into one monthly payment. Because of these reasons it is a good way of refinancing all of your student loans.
How Does it Work?
School loan consolidation loans generally reduce the size of the payment every month as it extends the term of the loan beyond the 10-year repayment plan that usually comes with a federal student loan. Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. It depends on the loan but usually the term can be extended from 12-30 years. By reducing the monthly payment you can pay back the loan easier for some people. But you should know that by extending the term of the student loan the entire amount of the loan increases because the total amount in interest paid back is increased.
Alternatives to School Loan Consolidation
If you have just graduated from college and are having trouble making payments you can look into other alternatives for repayment of loans that are provided for federal loans but not private ones. One thing you can look into are income contingent payments, as an example, are adjusted to take into account for a lower monthly income of the individual. Graduated repayment allows for lower payments for the first two years after you have graduated college. Being able to extend the repayment of the loans allows you to extend the term of the student loan without having to consolidate it. These options will raise the entire amount of the paid interest the increase is still less that if you would consolidate the loan.
School loan consolidation can make it easier to make payments on your student loans. It is a good option for refinancing but it is not the only option available.