Uncovering The Facts Behind The Myths of Student Loan Consolidation

If you've got student loans, then please pay close attention! You're about to learn a lot of valuable information about student loan consolidation that, if acted upon, could put a lot of money back in your pocket after college.

Myth: Consolidation of student loans is just too complicated to invest time in!

Fact: While it may seem complicated or time consuming, the process of consolidating Federal student loans is rather simple and the rewards are bountiful. In fact, the process has been made easier than ever by student loan companies who will do all the work for you. They will walk you through the entire process and even help you pick out the repayment package that's best for you. Student loan consolidation can transform your loans into one, simple, manageable repayment package that'll make paying back your student loans easier than you can imagine.

Myth: If I have a single lender, I have been told I can not consolidate.

Fact: No longer true! In June, 2006, the single lender rule was repealed by Congress and President Bush. In fact, a student loan company, OneSimpleLoan, filed a lawsuit challenging the Department of Education in June 2006. That effort was a catalyst in overturning the single lender law!

As a result, you now have the freedom of choice to consolidate your student loans with anyone you choose, regardless of who your original lender is. Make sure you choose a company that has your best interests at heart all the time.

Myth: If I consolidate my loans, I must extend the terms of my loan.

Fact: Not true. You can, indeed, maintain the exact same terms and monthly repayment amount as your original student loans. (This is a good idea, since you may be able to pay off your consolidated loan even faster!)

Myth: As long as I'm in school, I cannot consolidate any of my Federal student loans until I graduate or leave school.

Fact: Not entirely true. If you are in graduate school, you can consolidate your undergraduate school loans. Also, if you're in a post-graduate program, such as medical school or law school, you can consolidate your undergraduate and graduate school loans!

Myth: Even if I have a high interest rate but I've already consolidated before, I can't consolidate my student loans again to take advantage of a low fixed rate.

Fact: Not true. You can reconsolidate if you either received a new eligible loan since the consolidation or have left an eligible loan out of the original consolidation.

Myth: Student Loan Consolidation will hurt my credit rating.

Fact: Not true. If anything, federal student loan consolidation may help your credit rating, so that you can have the ability to obtain additional credit for things like a mortgage or a new car!
When you apply for any form of credit, such as a mortgage loan or credit card, lenders will evaluate your credit score as part of the application process. Your credit score takes into account the number of creditors you have as well as the balance of outstanding loans. By consolidating your student loans into a single loan, you can effectively decrease the number of creditors on your credit history, thereby enhancing your overall credit score.

You'll be happy to know that at most student loan companies, there are no credit checks!

Myth: The word "consolidation" is frowned upon in the credit industry.

Fact: Not true. There are two types of consolidations in the credit world. One is consumer debt consolidation and the other is a federal student loan consolidation. Each is very different from the other. Consumer debt consolidation is usually meant for people who have had trouble paying off their bills and can really hurt their relationships with their creditors. Student loan consolidation, on the other hand, doesn't hurt anything. No relationships are harmed because, by consolidating all your federal student loans, lenders will be paid in full and one single new loan (a consolidation loan) will be issued in its place. In fact, your credit rating may actually improve after you consolidate!

If there's one good thing that the government has given the American student, it's the option of student loan consolidation. If there's anything a student should consider after graduation, it's student loan consolidation.

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Facts About Student Loan Consolidation

Undergraduate students, graduate students, and the parents of students can look to lenders, credit unions, and the federal government for help if they want to simplify their debt. A wealth of student loan consolidation experts are available to guide students and parents through the act of putting all of their student loans together into one lump sum with a reduced interest rate. This helps students and parents to significantly reduce the number of bills they have to pay each month. It is also a fantastic way to manage finances and begin the process of getting their monthly payments under control.

Federal student loan consolidation allows all active student loans to be compiled into one manageable monthly payment. If a student qualifies for federal student loans, then he or she also qualifies for federal student loan consolidation. This includes Stafford loans, Perkins loans, PLUS loans, Direct loans, HEAL, SLS, Health Professional student loans, NSL, and Guaranteed Student loans. Whether the recipient of a loan is the student or his or her parents, they can look into student loan consolidation. All loans must be consolidated separately, however. In July of 2006, a new provision maintains that married students are no longer allowed to lump their student loans together for the purpose of consolidation. An individual's loans must be consolidated separately.

Consolidation becomes a viable option only after the repayment period for a loan or loans has begun, or during the inherent grace period. Students are no longer able to begin consolidating their loans while they are still attending college. Parents however can begin to consolidate their PLUS loans at any time. As long as the repayment plan is satisfactory, loan recipients are also able to consolidate student loans if the loans are in default.

Both parents and students have to consolidate their student loans with a lender who is different from the one who loaned them the initial student loans. Doing so allows them to receive a lower interest rate and substantially more savings. Generally, lenders require a minimum balance for loan consolidation. Federal and private student loans have to be consolidated separately. This is because federal loan consolidation usually offers better advantages and lower interest rates. Interest rates are determined by averaging the current rates of the loans which will be consolidated and rounding the answer up to one-eighth of a percent. The interest rate can go up if a borrower extends the terms of the loan's repayment plan.

Federal loan consolidation requires no credit checks but the period of repayment is usually longer. In general, consolidating federal student loans results in lower monthly payments, because the loan period is extended from ten years to anywhere between twelve and thirty - it all depends on the amount of the loan.

Federal student loans and private student loans cannot be consolidated into one big loan. They are entirely separate loans and have to remain separated even in matters of consolidation. The primary benefit of consolidating private student loans is the borrower's ability to receive a single payment a month. It is entirely possible that the monthly amount will be lower, as the act of consolidating resets the entire student loan period. Any private student loan which has been consolidated will likely have a higher total interest rate, since it has to be paid out over a longer period of time. When deciding to consolidate student loans, the recipient of the loan should research which consolidation companies offer variable or fixed interest rates, what any penalties may be, and what kinds of fees are charged.

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