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What is student loan consolidation and how does it work?

The whole issue of student loan is a complex labyrinth that anyone can be lost in. Studying student loan options, I faced many terms that were not properly explained on the Internet. One of them is student loan consolidation. It often comes in pair with refinancing which is just as mysterious. These student loan services are widespread, as far as I understand, but are not fully explained. Can anyone tell me the basics of these student loan services and how they work?

I’m currently on anything college related, from campus dormitories to parent student loans. Feel free to indulge in any additional topic.

Whitney Matthews

in Study Abroad

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Victoria Fowler on March 14, 2018

While these terms may seem difficult and are usually described using many complex words, the core of loan consolidation for students is the mix of all loans you have. Basically, consolidation is meant to simplify the process of repayment as it combines all your debts into one which is divided into monthly payments. Though the whole process seems to be beneficial for students, it brings minor inconveniences. For example, consolidation may lead to the loss of such loan benefits as interest rate discounts, rebates, and loan cancellation.

There are many loan consolidation calculators meant to make the process easier for you. However, be careful when choosing a program and check your results on another website. Most often, students consolidate federal loans through the government-backed programs. The repayment rates are calculated based on the average interest of all combined loans. When dealing with private ones, the process of consolidation is still possible but is not supported by a unified government program.

As for refinancing, this process is somewhat more complex. In this case, you take another loan to pay off the previous ones and combine them all into one loan. However, refinancing allows you to seek better interest rates reducing the total amount of your debt. In addition, it doesn’t matter whether you have federal or private loans; the borrower covers all of them. This student loan option makes sense when you have high interest rates and want to lower them. Sometimes, you can save thousands of dollars this way. However, each borrower has to study all options and choose the one that suits their conditions the most.

Here, I’ve found the list of great companies that can help you with student loans consolidation and refinancing https://lendedu.com/blog/refinance-student-loans/

All of them work with both federal and private offers and set the repayment term to 5-20 years. Without any application fees, students can consult with the companies’ representatives and set those conditions that suit both parties.

This student loan service is quite popular nowadays for many people want to get rid of their loans as fast as they can and lower their interest rates to a minimum. It takes about 15 minutes to apply for refinancing but the results save a lot of money for some people.

As for loans for student’s parents, I can say only that you have to be looking for the federal PLUS offers that are designed specifically for this purpose.

Larry Warrena year ago

The issue of student loan consolidation and refinancing has been fully uncovered here. Good job! I’d like to add a few details to the last question—federal parent student loans. The most reputable option is the federal PLUS program. While private lenders are new in the whole business of parent loans, the government has been doing it for years. To take a loan, you have to have a good credit history and fill in the FAFSA application. Ones you are approved, you’ll receive a payment schedule. Usually, this student loan option is issued for a 10-year term. However, the government also offers to switch to income contingent repayment plan if you are struggling. This way, the term may be extended to 25 years and your monthly payments will take 20% of your income.

This kind of loan also can be consolidated thus decreasing interest rates. Besides, parents have better chances for refinancing approval.


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