College Loan Consolidation

College education can be a major financial strain on parents and students alike. Most students look to some form of financial aid to asist in paying for college. In many cases, before or after graduation, a person may find themselves paying on more than one student loan. During times with low interest rates, it's a good idea to consider college loan consolidation. Consolidating college loans will provide the benefit of having a single payment and preferably a low interest rate.

The first step to take before applying for any college loan consolidation is to conduct thorough research. Search the term college loan consolidation. Consider the pros and cons of taking out another college loan. Research interest rates and only consider reputable loan institutions.

Preparation

Before you start filling out forms, gather all the important paperwork required to complete the application. Items such as social security card, income tax returns, driver's license, loan account numbers, bank statements and income tax returns may be required. You may need to show a financial burden, such as loss of employment or medical expenses, which increases your need for a loan.

There are two main categories of college loan consolidation - government and private.

Government College Loan Consolidation

There are two major Federal college loans - Stafford and Perkins. It is required that you demonstrate financial need in order to apply for either of these loans. Items such as employment paystubs, tax returns and parents' yearly income may be required. Loan application forms can be found at websites such as FindAid.org. It will take some time for the financial aid office to verify your information and inform you of the final decision. Federal college loan consolidation is very popular due to its many benefits. More information can be found at Government Student Loan Consolidation.

Private College Loan Consolidation

In the event that Federal loans won't cover all your college expenses, you can also apply for private loans. Your own college may provide you with a list upon acceptance. Also, you can contact your bank and ask for a referral. Online research will also be beneficial in locating many options for private loans. More information can be found at Private Student Loan Consolidation.

Credit Score

Consolidating multiple loans into one should improve your credit score, as it limits the amount of loans you have open at one time. It's also likely that you'll have a lower overall payment as a result of the individual loan amounts being combined. The lower payment can improve your credit score. A good credit score is crucial in gaining a low interes rate for college loan consolidation.

Credit Score Debt-to-Credit Ratio

Your debt-to-credit ratio is calculated by looking at your credit limits minus your debt owed. For example, if you have a $10,000 credit limit on a credit card but owe $9,500 on that card, you have a very poor debt-to-credit ratio. A poor debt-to-credit ratio will lower your credit score. College loan consolidation can reduce the amount of open accounts you have and improve your debt-to-credit ratio thus improving your credit score.

Student Loan Debt Consolidation

Benefits of Student Loan Debt Consolidation include:

Lower interest rate

Lower monthly payments

A longer repayment schedule

Having only one loan to pay

Student loan debt consolidation combines all your loans into a single loan with a single payment. The payment amount is also reduced, giving you more cash in hand while in school. This can relieve the stress of paying and managing multiple loans.

Almost half of college graduates have a federal or private loan when they leave school. This can be a huge burden for new graduates. Some students take out a new loan each year and thus, at graduation time, those loans become due. Loan consolidation can ease the stress of multiple monthly payments.

Applying for student loans can be complicated. Let's start by identifying the common types of student loans:

Federal Stafford loans:
  - Most common
  - Low fixed interest rates
  - Can be used for tuition and other school-related expenses

Subsidized federal Stafford loans:
  - Government pays interest charges while you are in school
  - You pay loan and interest in repayment period
  - Based on financial need

Unsubsidized federal Stafford loans:
- Borrower pays interest while in school
- Can borrow more money than in subsidized loan

Federal PLUS loans:
- Only given to parents and guardians of college-age students

Federal Perkins loans:
- Government pays interest as long as you are attending class
- Geared toward lower income and needy families

Private student loans:
- Use only if other forms of financial aid are not available
- A co-signer will be necessary, if you have no income

International student loans:
- For American college students traveling abroad to study
- For international students coming to the U.S. to study

Repaying a student loan generally begins six months after you complete your college program. You need to make your monthly loan payments on time, because you cannot file for bankruptcy to discharge the debt. If you are struggling to repay your college student loans, then you need to contact your lender immediately.

You can consolidate your student loans, speak to a representative about reducing your monthly payments or apply for forbearance. Your financial situation will be assessed, and a plan will then be created to ensure that you do not default on your federal student loans.

When you consolidate student loans, you combine all of your outstanding loans and extend the repayment period to its maximum. This reduces the overall amount of your monthly payment, which can be very beneficial.

You can refinance student loans; this also helps you reduce your monthly loan payments. You can refinance both your federal and private student loans in order to save money on interest. You do, however, need to have a good credit score in order to refinance.

Forbearance is available to people experiencing a financial hardship, such as the loss of a job, the death of a spouse or family member, or a debilitating illness. It allows you to reduce the amount of your monthly payments, temporarily stop making your loan payments or extend the time period of your repayment plan.

Having a student loan is a big responsibility; you need to find the type of loan that is right for you and your finances. If you have any doubts, then you should speak to a financial aid representative at your college. They can help you navigate your way through the entire process.