When students exit college they are often told to look into federal student loan consolidation. Generally speaking, the federal student loan consolidation plan is a great way to manage student loans. However, not everyone needs to consolidate federal loans. Here are a few questions, as recommended by the U.S. Department of Education, to ask when considering a loan consolidation plan.
Can you make you monthly payments? If you can easily meet the requirements you monthly payments, maybe you don’t need a consolidation loan after all. A true sign of need is when you have exhausted your deferment and forbearance options. Often borrowers will opt for a federal student loan consolidation to avoid default. You can use the U.S. Department of Education’s online calculator to determine what you payments would be per month under each repayment plan.
Are your bills hard to manage? One thing that makes student loan consolidations so attractive is the fact it combines all of your loans into one monthly payment. It certainly is easier to make one payment on time versus several.
How do you interest rates match up? Federal education loans that feature variable interest rates can be consolidated under a fixed rate. This means the rate is fixed for the life of the loan. Interest rates are calculated based on the weighted average of the rates of your current loans. In all, the rate cannot exceed 8.25 percent. Again you can use an online calculator found at www.ed.gov to determine just how beneficial a federal student loan consolidation will be in the end.
How many installments are left on your federal loans? Borrowers who are near the end of the repayment may find it is not worth the hassle to consolidate or extend their loan payments.
How much do you want to pay in the long run? Like any other loan, when you refinance, you ultimately extend the years of repayment on your loan. This translates into more money shed out of your pocket.
Can you make you monthly payments? If you can easily meet the requirements you monthly payments, maybe you don’t need a consolidation loan after all. A true sign of need is when you have exhausted your deferment and forbearance options. Often borrowers will opt for a federal student loan consolidation to avoid default. You can use the U.S. Department of Education’s online calculator to determine what you payments would be per month under each repayment plan.
Are your bills hard to manage? One thing that makes student loan consolidations so attractive is the fact it combines all of your loans into one monthly payment. It certainly is easier to make one payment on time versus several.
How do you interest rates match up? Federal education loans that feature variable interest rates can be consolidated under a fixed rate. This means the rate is fixed for the life of the loan. Interest rates are calculated based on the weighted average of the rates of your current loans. In all, the rate cannot exceed 8.25 percent. Again you can use an online calculator found at www.ed.gov to determine just how beneficial a federal student loan consolidation will be in the end.
How many installments are left on your federal loans? Borrowers who are near the end of the repayment may find it is not worth the hassle to consolidate or extend their loan payments.
How much do you want to pay in the long run? Like any other loan, when you refinance, you ultimately extend the years of repayment on your loan. This translates into more money shed out of your pocket.
