Consolidate your student loans to repay debts faster

If you have taken loans from various lenders to finance your college education and are now having a hard time repaying the loans, you can take advantage of student loan consolidation program.

What a loan consolidation program is

When you will opt for a student loan consolidation program, all your outstanding loan balances will get replaced by a new consolidated loan. So, instead of paying multiple lenders, you will now have to pay a single lender. Your parents can also go for a consolidation program, on your behalf.

The interest rate for your consolidated loan will be calculated by taking the average of the interest rates of all your existing loans, which are to be consolidated. Then it will be rounded up to the next one-eighth of one percent. The maximum interest rate is 8.25 percent.

To opt for a consolidation program, you can take help of any credit union or bank. You can also get it directly from the U.S. Department of Education. It would be better to first check with the lender, from whom you have taken your current loan. The consolidation process usually takes around 30-45 days.

However, Sallie Mae has suspended participating in the student loan consolidation program for Federal student loans. But, if you have taken private loans, the one month LIBOR rate, effective from 26th April, 2010, is 0.375%. It has also ceased to pay 1.5% loan origination fees on Stafford loans.

Types of loan to be consolidated

  • The types of loans that fall under the loan consolidation program are:
  • Direct PLUS Loans and Federal PLUS Loans
  • Federal Subsidized and Unsubsidized Federal Stafford Loans
  • Federal Perkins Loans
  • Health Education Assistance Loans
  • Nursing Student Loans
  • National Defense Student Loans
  • Loans for Disadvantaged Students
  • Direct Consolidation Loans and Federal Consolidation Loans
  • Federal Insured Student Loans
  • Health Professions Student Loans

Advantages of private and federal loan consolidation program

  • The benefits of private loan consolidation program are:
  • You will have lower monthly payments by extending the repayment.
  • If you have improved your credit, you will have lower interest.
  • If you submit your application along with a co-signer, who has superior credit score, you will receive lower.
  • If you are a medical/dental resident, you will get a 48 month deferment and a 36 month deferment if you are a military personnel.
  • If you are an undergraduate borrower, you may receive upto a 25 year repayment term.
  • If you are a graduate borrower, your repayment term will be upto 30 years.
  • There will not be any prepayment penalties and all extra payments will go directly to the principal.

The benefits of federal loan consolidation program are:

  • Your monthly payments will get reduced
  • There will be no credit check
  • If you consolidate during your grace period, your interest rate can be reduced by 0.6%
  • You can get a lower lock in rate for the life of the loan
  • It will improve your credit rating

Before you opt for a student loan consolidation program, you should ensure that the interest rate on your new loan is lower than your current loans. You should shop around and compare the quotes offered by different lenders and choose the type of loan, whose terms and conditions suit you the best.

Learn more about how you can consolidate your student loans and get scholarships by visiting

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