School Loan Consolidation : An Overview

Similar to Refinancing a Mortgage

If you have obligations still remaining from your school years, then school loan consolidation is a type of debt consolidation that permits you to merge all your debts into one convenient monthly payment. The lender uses the monies to pay off your current loan balances on your outstanding loans. Therefore, you can liken this type of financing to that of a refinance for a home mortgage. In addition, lenders who consolidate student loans can offer both financing for federal as well as private consolidations.

Lower Payments for a Longer Term

Usually, with a student loan consolidation, you will be paying off the consolidated amount for a longer period of time. That’s because you will be remitting a lower amount on your debt each month in order to manage the debt. While no fees are incurred, you will be paying more on the interest over the time of the loan.

Lending Companies that Charge Fees are not Legitimate

In fact, never sign up with any lending company that requires you to pay any kind of fee upfront in order to secure a consolidated loan. An advance should never be required by a lender in order to consolidate student debt.

Separating Debt for Purposes of Consolidation

A husband and wife each must obtain consolidation for their individual loan amounts. In other words, you can’t combine both of their outstanding loans into a single consolidation. Each borrower is responsible for his own debts.

Educational Loans Taken out by Parents and Children

Also, PLUS loans and Stafford loans taken out by parents can be consolidated. However, a parent would not be able, say, to include their child’s Stafford loans into their consolidated loan amount. Nor could children, for instance, include their parents’ PLUS loans into their individual consolidation.

Loans that can be Consolidated

Student loans that meet the eligibility requirements for student loan consolidation include Parent PLUS, Grad PLUS, Stafford, HEAL, SLS, and Perkins. However, you may not want to include Perkins obligations in a consolidation if you don’t want to lose your options for forgiveness of the debts.

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