Federal Student Loan Consolidation - Up To 50 % Savings
This is the main reason, why it is not wise to consolidate the private and the federal
loans into one bigger student loan, but to make the consolidation. I will not handle the private loan consolidation, nor to compare the federal and the private loans in this article.
1. Lower The Monthly Payments Up To 50 %.
The main target for the consolidation is to lower the monthly payments and thus to get more disposable money for other purposes in the life. This is natural if we think, that the graduates are just starting their lives and have lots of payments to do.
When we speak about the federal loans, there is only one factor in use, if a graduate wants to lower the monthly payments and that is the payment time, because the interest rate is fixed. Just by extending the payment time from 10 years to 20 years, a borrower can save 34 % in the monthly payments.
It is useful to think, that the longer payment time will mean more years, when you have to pay interests and that will grow your total loan expenses. It would be wise to find out a balance between the short term needs and the long term expenses, when you plan the student loan consolidation.
2 No Pre-Payment Penalties.
It is an important term, that a borrower has a chance to pay the loan back sooner, than what was planned. If he has this term in the contract, then he can take the longest possible loan time, because if his incomes improve, he can start to pay more, when he wants.
3. Simplify Your Monthly Loan Management.
When you will do the student loan consolidation, you will at the same time make your loan management simpler, because you will get one loan instead of several ones. This makes it easier to handle the student loan issue.
4. There Is No Credit Check.
When you take the federal student loan consolidation, there is no credit check. Also the process is totally free and you do not need any co-signers. If you will have difficulties to pay, the loan payment can be deferred. If you will pass away, the consolidated loan will be forgiven.
5. The Interests Are Federal Income Tax Deductible.
This is a nice small added benefit, which will reduce the loan management costs. This is the thing, which you have to take into account, when you calculate the total costs of your student loans.
by: Juhani Tontti
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