4 Important Facts About Student Loan Consolidation

When getting loans you should always understand what you?re getting yourself into before you sign up. So here are 4 important facts you should know about consolidating student loans.

Fact 1: Same Interest Rates For Everyone At The Start
All federal student loan consolidation rates must start with the same rates that are suggested by Congress every year. Student loan consolidation companies are required to give everyone the same federal rates

Fact 2: You Save Money On The Benefits
If it?s your first time consolidating your loan then the real savings are in the benefits and discounts of signing up.

Standard benefit: 0.25% off your rate for using automatic checking account withdrawal.
Standard benefit: 0.6% off your repayment rate if you consolidate in your grace period.
Extra benefit: if you have more than $20,000 in federal student loans, 1.0% off after your first 36 on time payments.

Ok let?s start with a scenario, of $25,000 in federal Stafford loans and your rate before 1 July 2006 is at 3.37%. If you?re still in your grace period (6 months before your payments start only for graduates) you?re rate will decrease to 2.875%.

Automatic checking account withdrawal will reduce is further to 2.625% and after your 36th on time payments your rates will drop a further 1.0% to a new low of 1.625%. This is how the benefits of student loan consolidation really works and it really saves you a lot of money.

Fact 3: Read The Fine Print Before You Sign Anything!
Some loan companies will give you a list of borrower?s benefits for signing up with them. For example if you make 24 on time payments you?ll get 1% off which is great but in the fine print it?s only available for loans above $50,000. Statistically, only 17% of all graduates will have a loan debt this high so it?s not advised to sign up with this particular company.

Other companies give even better benefits like 2.5% off your rate but they?ll only give you a grace period of 3 days. That?s not going to work because what happens if your mail got delayed or worse you didn?t check your mail? It means that you?ll loose your benefits so be careful and always read the fine print.

Fact 4: Good Customer Service Is Important
Some student loan companies will do anything to make you call them but when you do you find yourself lost because some companies don?t train their phone staff well and they fail to answer simple questions. So when ringing up loan companies make sure they are well versed in their products and they know their products and rates. Also make sure that when you wait on the phone for a consultant, that you don?t wait too long like 1 hour because it could mean they are under staff or they are taking on too many applications at one time which means they might not always be able to take your call after you?ve sign up.

I hope these facts will help you in your decision and may you have a successful time finding the best student loan consolidation company.

Consolidate your student loans today and save up to 60% on your monthly repayments. Find out how you can start saving money and find out more about consolidate student loans.

Terms of student loan can be tough

Like millions of Americans, Nancy McMenamin of Winters, Calif., went back to college to launch a new career. After five years, she acquired a master's degree in mental health counseling. And $27,000 in student loan debt.
Now 74, McMenamin has been paying down that debt for nearly 20 years. Because of several deferments she took over the years, her overall debt has notched upward, to $36,000.

She's not delinquent but is anxious about her ability to repay in full, especially given the hefty interest rate on her Sallie Mae student loan: 9 percent.
"What I really want is to pay it off as soon as possible, but the interest rate is horrendous," says McMenamin, who was laid off in August from a part-time job with a Yolo County, Calif., mental health office. "What can I do?"
Especially in a stressed economy, student loan debt is a major issue. It's not uncommon to see students saddled with thousands in loans for undergraduate and graduate school costs.
Sallie Mae is one of a number of lenders that issue federal student loans. During fiscal 2007-2008, the U.S. Department of Education said 14.8 million federal student loans were issued, totaling $68.2 billion. Sallie Mae, a private student lender, is managing $178 billion in loans for 10 million customers, including McMenamin.
The bad news is that McMenamin's 9 percent interest rate is pretty well locked in. Congress sets the terms on federal student loans for Sallie Mae and other private lenders, such as banks or credit unions. Loans can be consolidated, but once that's done the interest rate is set.
"Often, Sallie Mae faces cases like this where we'd love to be able to help," said Conwey Casillas, a Sallie Mae spokesman. "But by law, we're not given that option."
What's especially frustrating for student borrowers is the wide disparity in interest rates. Because they're pegged to Treasury bill rates, interest rates on federal student loans dipped as low as 2.8 percent in 2004-05. Currently, rates on Stafford loans like McMenamin's are set at 6.8 percent (6 percent for those with documented financial need.)
Casillas and others acknowledge that the variable rates have created "inequality" among holders of student loans.
But Sallie Mae and other federal loan lenders do offer ways to lessen the monthly burden.
Borrowers like McMenamin can lower their monthly payment - sometimes by half. Or they can request an extension on the standard 10-year repayment terms.
And in July, new borrowers facing economic hardships can apply for an "income-contingent" repayment plan based on income, family size and other factors. After 25 years, the loan would be forgiven.
Another option, which McMenamin is using, allows borrowers to defer payments because of unemployment or other economic difficulties. After being laid off in August, she obtained a six-month deferment on her payments, which resume in February. McMenamin also was able to drop her monthly payment from $376 to $281, due to her reduced income.
The downside to all the repayment options: The interest continues to pile on. In McMenamin's case, her loan amount is now $36,000, due to accumulated interest.
What would a financial planner advise?
"I really admire that she is owning up and not trying to get out of the responsibility of paying the loan," said Betsey Archer, a longtime Sacramento, Calif., certified financial planner. "Unfortunately, in today's marketplace, her ability to refinance the loan is very limited, especially without a job."
And it may not actually help the situation. As an example, Archer calculated that if McMenamin were able to obtain a five-year bank loan at 6 percent, her payments on the loan would be $692.50 a month, more than double what she is paying now.
And because McMenamin and her husband do not own a home, they can't tap any home equity to pay off their entire loan. (A federal student loan can be repaid in full at any time without penalty.)
"Her best option from a cash-flow standpoint may be to keep paying the $281 month until her economic situation changes," said Archer.
Borrowers like McMenamin are advised to contact their lender or the U.S. Department of Education (www.ed.gov/finaid) to see which repayment options work best for them.