When graduates ponder, whether they will consolidate student loans, they have to do some math. Only by lengthen the payment time from 10 to 20 years they can reduce the monthly payments by 34 %.
This is a careful process, because one person can consolidate student loans only once, concerning the same loans. But if a person continues studying and will take another loan or more loans, he can of course consolidate these.
One side benefit to consolidate student loans concerning the private loans is, that the process can remove the co-signer, which will save a parent or relative from the potential liability.
Most private loan lenders require a minimum balance of $ 5.000 before a person can apply and the federal loans have a $ 10.000 minimum.
The federal loans have some advantages. You can avoid the payments, if you will meet hard economic times and you have a chance to deduct the interests in the taxation. Also if you will pass away, the federal loan will be forgiven. The federal loans have fixed interest rates, so you know how much you have to pay.
To be able to qualify, you must be in the grace period or in the repayment period, you cannot be in a default status with any of your loans and you must be a permanent US resident. You have not consolidated the same loans before or have gone back to studying again and got new loans.
If you consolidate after the grace period, your interest rate will be higher.
The federal consolidation loans have four payment schemes. The repayment schedule depends on how you plan your financial future. You can select between four alternatives.
The standard payments means the fixed monthly payments, the graduated payments mean the gradually increasing payments, the income sensitive payments mean payments, which are tied to the amount of your income and the extended payments mean that you have to pay over some minimum amount in a certain time.
You have to start paying the federal loan 30 days after your loan has been funded. However, you can switch the repayment plan simply by contacting the servicing bank. This process has no extra costs, but you can switch the plan only once a year.
The maximum length of your consolidated federal loan depends on the amount of the loans. However, the years vary from ten to thirty years.
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