Federal School Loan Consolidation Could Help Make Recent Graduates’ Student Loan Repayment Easier to Manage

If you graduated in May with student loans, you might be facing six-month grace periods which are ending at some point this month. Once your grace time periods are over, you’ll be entering payment for those student loans that were in deferment.

If you’re looking at multiple student education loans starting pay back, you’ll soon probably experience juggling numerous bills, several due dates, and numerous monthly payments. But you could help make your education loan repayment much easier to control by consolidating your eligible government student loans with a Federal Consolidation Loan.

How Federal School Loan Consolidation Works

A Federal Consolidation Loan packages all of your qualified federal student loans into one single loan with one monthly bill and one convenient monthly payment. To become qualified for student loan consolidation, you can’t currently be signed up for school more than half time, as well as the student loans you wish to consolidate have to be in repayment, in a leeway period, or perhaps in an authorized forbearance or deferment period.

Should your parents have Federal PLUS Loans which they took out to assist you pay for school, they’re also eligible to consolidate. And your mother and father don’t have to wait for you to graduate in order to consolidate their particular PLUS loans: Parents can consolidate the PLUS loans they took out for your education once the loans are fully disbursed and also have entered pay back, even if you’re still in school. Your folks can consolidate their parent PLUS loans, however , you won’t have the ability to consolidate your own student education loans along with your parents’ loans.

Advantages of Federal Student Loan Consolidation

1. No fees and no cost to apply
2. No credit checks and no co-signers required
3. No prepayment fees and penalties
4. Fixed annual interest rate
5. Repayment terms up to thirty years
6. A single monthly installment for your qualified federal student loans

There’s never any charge to obtain a Federal Consolidation Loan, and there are no credit checks or co-signers required. There are also no early repayment charges, so you  never be billed for paying in excess of the minimum each month or for paying off your student loan consolidation early.

School loan consolidation provides you with the security of a set interest rate: With a fixed rate, you will lock in your monthly payments once you consolidate, therefore you’ll never need to be worried about variable interest rates rising, causing you to be speculating regarding your monthly payment amount.

Consolidating your federal student loans may also give you a longer period to repay—a Federal Consolidation Loan could extend the repayment term for your student loans by up to twenty years. And also stretching out your payments spanning a lengthier reimbursement term, a student loan consolidation may lower the amount you need to pay every month. By consolidating, you may be in a position to cut your monthly student loan payments up to 50 percent!

Consolidating Your Private Student Loans

If you have private student loans in addition to (or instead of) federal student loans, you won’t be able to combine the private loans with the federal student loan consolidation plan. But if you’re interested in the same comfort of a single consolidated bank loan for your private student loans, you might be eligible to consolidate your private loans separately with a Private Consolidation Loan.

What You Should Know About FAFSA

The FAFSA, or Free Application for Federal Student Aid, is the first step in the financial aid process. In order to qualify for a student aid loan you will need to complete the FAFSA application.

If you currently have student loans and are planning on doing a school loan consolidation, you will probably not need to complete the FAFSA again.

The FAFSA online application will ask income history and other important information. After submitting the application, it will be processed by the Department of Education. Once they have determined what aid you qualify for, you will be sent a Student Aid Report (SAR). An electronic copy of your SAR is also made available to the schools you’ve listed on your FAFSA.

The Student Aid Report will show what types of aid you qualify for, including federal and state grants, such as the Pell grant, Stafford loans, and parent loans.

If you were awarded student loans or parent loans, you will then complete the application process for the specific type of loan you qualified for. Generally the funds are transferred to the college, and you will receive a disbursement during registration if your awards were above the cost of tuition and fees. These disbursements can take up to 45 days from the time they are issued.

• Reduces your monthly considerably.
• Locks in your interest rate.
• Simplifies your finances by having you make only one payment a month.
• Improves your credit rating.
• Saves you money today when you need it most.
• Provides flexible repayment options.

The FAFSA online application will ask income history and other important information. After submitting the application, it will be processed by the Department of Education. Once they have determined what aid you qualify for, you will be sent a Student Aid Report (SAR). An electronic copy of your SAR is also made available to the schools you’ve listed on your FAFSA.

The Student Aid Report will show what types of aid you qualify for, including federal and state grants, such as the Pell grant, Stafford loans, and parent loans.

If you were awarded student loans or parent loans, you will then complete the application process for the specific type of loan you qualified for. Generally the funds are transferred to the college, and you will receive a disbursement during registration if your awards were above the cost of tuition and fees.  These disbursements can take up to 45 days from the time they are issued.

Complete the FAFSA Application

Bank of America Federal Consolidation Loans
Federal loan consolidation program from Bank of America
http://www.BankofAmerica.com

Citibank Student Loans & Consolidation Loans
Sign up online or use the Citi-Bank Loan Advisor to help you select the right loan
http://www.studentloan.citibank.com

Chase Loan Consolidation
Consolidate your current school loans and lower your interest rate and monthly payments
http://www.chasestudentloans.com

NextStudent Federal & Private Consolidation Loans
Consolidate for free, no charges or credit checks
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The Higher Education Act of 1965 sets the maximum interest rates and fees on student loans. Nothing, however, prevents a lender from charging lower interest rates and fees. (The illegal inducements regulations prevent lenders from providing immediate rebates, which would be akin to paying borrowers for their loans. However, most lenders work around these restrictions by instituting a one month delay in rebate-style discounts, or by providing the discounts when the loan enters repayment or at other milestones.)

Lenders offer loan discounts for competitive reasons. Originally the competition was with the Direct Loan program. However, with the repeal of the single holder rule, lenders are increasingly competing with each other for the highly profitable student loan market.

Since the repeal of the single holder rule on June 15, 2006 allows borrowers to consolidate their loans with any lender, the originating lenders face a risk of losing their borrowers to other lenders. They are responding by offering better discounts on unconsolidated Stafford and PLUS loans, by instituting discounts that depend on longevity with the lender (e.g., rate reductions and principal reductions after so many months into repayment and waivers of the last six monthly loan payments), and by requiring certain discounts to be repaid if you consolidate with another lender. The originating lenders can offer better discounts on unconsolidated Stafford and PLUS loans because lender margins are tighter on consolidation loans.

The Most Common Discounts

The most common loan discounts include a 0.25% interest rate reduction for having your monthly loan payments direct debited from your bank account (and also often requiring online electronic statement delivery). Many lenders also waive the origination fees on Stafford Loans. Depending on the guarantor, they may also waive the 1% default fee (previously “guarantee fee”).

Many lenders also offer additional discounts for making all of your monthly payments on time. For consolidation and PLUS loans many lenders offer a 1% interest rate reduction after 36 months of on-time monthly payments for as long as you continue making on-time payments. The on-time payments must be consecutive (no skips) and start when the loan enters repayment. (A few lenders offer a “repair option” which resets the on-time payment clock, but most lenders require all the initial monthly payments to be on-time.) For Stafford loans the most common discount involves a 2% interest rate reduction after 48 months of on-time monthly payments for as long as you continue making on-time payments. A recent trend is to replace these interest rate discounts with principal reductions after reaching a milestone, such as 3.33% principal reduction after 33 months.

The most common loan discounts include:

* Direct Debit (ACH/EFT) Discounts: Interest rate reductions of 0.25% or 0.50% (Less common are 0.30%, 0.33%, 1.0%, 1.25%, 1.5%, 1.75%, 2.0% and 2.5% rate reductions, some of which also depend on on-time payment behavior.)
* On-time Payment Discounts:
o Interest rate reductions of 1% after 0 months, 1% after 36 months, 2% after 48 months. (Less common are split discounts, such as successive 0.5% rate reductions after 24, 36 and 48 months or successive 1% rate reductions after 24 and 48 months.)
o Principal reductions of 3.3% (based on original loan balance) after 33 months, 7% (based on current loan balance) after 48 months. (Less common are split discounts, such as successive principal reductions of 1% at 24 months, 2% at 36 months and 3% at 48 months.) Some principal reductions may have a dollar cap (e.g., 1% principal reduction capped at $500).
o Principal reductions of $295 or $595 after 12 months.
o Credit for first 12 months interest applied after 12 months
o Rebate origination fee of 3% minus $250 after 24 months.
* Graduation credits of $250, $300, $500 or $750 (effectively a principal reduction upon entering repayment).
* Forgive last 5 or 6 payments.
* Forgive loan balance when drops below $600.

Tips for Evaluating Loan Discounts

Here are a few tips for evaluating Loan Discounts:

* Be realistic about your ability to make all of the payments on time.
* Focus on discounts that are immediate in nature (front-end discounts) and loan discounts which you can’t lose. These include discounts for direct debit of the monthly payments from your bank account, fee rebates you receive soon after signing up, and interest rate and principal reductions that do not require on-time payment.
* When a repayment incentive requires on-time payments, prefer those that involve a shorter time period before you can qualify for the discount. A discount that is suspended for a short time period after you are late with a payment is better than one that terminates after a single late payment.
* Be sure to ask the lender whether there is a minimum balance to obtain the discounts. Often the discounts require a loan balance that is higher than the minimum balance required to consolidate.
* Sign up for the direct debit of the monthly payments from your bank account. It is more reliable and secure than sending the payments through the mail. You will be less likely to miss a payment.
* Be sure to notify the servicer of your loan of your new address any time you move. USPS mail forwarding expires after six months, just as the grace period runs out. Having your mail forwarded can also add delays that cause your payments to be late. This may explain why many borrowers who lose prompt payment discounts do so on the very first payment.
* Read the fine print on any discounts. In particular, ask whether you will have to repay the discount if you consolidate your loans.
* Ask what is considered an “on-time” payment; usually this is within 10-15 days of the due date, but for some lenders it can be within 30 days of the due date.
* Some colleges have negotiated additional discounts with particular lenders, so be sure to ask if there are any additional discounts for students from your school.
* Ask whether a principal reduction is based on the original principal balance or the current principal balance at the time the rebate is applied. The latter is worth less, since you will have a lower principal balance after making the required number of on-time monthly payments. When the lender fails to specify that the principal reduction is based on the original principal balance, it usually means that the reduction is based on the principal balance at the time you qualify for the reduction.
* Some lenders require you to request the discounts in writing within a specific time period. Be sure to read all the fine print.
* Ask whether the 0% fees are an actual waiver (upon disbursement) or a delayed credit (at repayment or later). The former is more valuable than the latter. Some lenders are failing to disclose that “0% origination fees” are actually implemented as a delayed credit.

Once you decide whether you can go with a larger lender or a service that specializes in challenged credit student loans, you will need to complete one of their applications. Most lenders have online applications that you can complete which makes it very easy to get approved. There are many of these lenders available at your disposal and we have links to these sites here. Please feel free to use any of the information and links on our site to assist you with finding a poor credit student loan.

What is FAFSA? The FAFSA, or Free Applicaton for Federal Student Aid, is the first step in the financial aid process. In order to qualify for a student aid loan you will need to complete the FAFSA application. The FAFSA online application will ask income history and other important information. After submitting the application, it will be processed by the Department of Education. Once they have determined what aid you qualify for, you will be sent a Student Aid Report (SAR). An electronic copy of your SAR is also made available to the schools you’ve listed on your FAFSA. The Student Aid Report will show what types of aid you qualify for, including federal and state grants, such as the Pell grant, Stafford loans, and parent loans.

Eligibility

*You must attend a community college at least half time and be working toward your degree.
*You must meet credit criteria.
*Borrowers must be U.S. citizens or permanent residents.
*International students are eligible with a creditworthy cosigner.

Benefits

*The Signature Student Loan has a high approval rate.
*If you have less-than-ideal credit or no credit at all, you can still be eligible for the Signature Student Loan by applying with a creditworthy cosigner.
*You can manage your account online 24/7.

Features

*Easy, secure online applications with immediate credit decision and electronic signature.
*No income requirement so you can focus on your studies.
*Cosigners help students get a lower interest rate and save a lot of money.
*Six-month grace period (like Stafford loans).
*No payments are required while you are in school at least half-time.
*The Signature Student Loan has interest rates and fees that reward good credit.
*Creditworthy borrowers may request a cosigner release after making the first 24 consecutive on-time payments of principal and interest as initially scheduled.
*There is no prepayment penalty.

Loan terms

*Minimum amount: $500
*Maximum amount: $15,000
*Aggregate amount: $50,000

Interest rate

Interest rates are variable and based on the Prime rate.

Fees

There is no disbursement fee; repayment fees are 0%–3% depending on credit history.
Repayment

*Standard repayment term of 15 years, with the option to extend terms (up to 30 years) for higher aggregate loan balances.
*Prepay your loan at any time without penalty.

Qualification requirements

* Enrollment in an eligible school at least half-time in a degree program
* U.S. citizenship, permanent residency, or eligible non-citizen status
* Satisfactory academic progress
* No unresolved defaults or overpayments owed on Title IV education loans and grants
* Satisfaction of all Selective Service requirements

The U.S. Department of Education provides a programmed amount of funding to the school. In turn, the school determines which students have the greatest need. The school combines federal funds with some of its own funds for loans to qualifying students.

To apply for this loan program, you must submit the Free Application for Federal Student Aid (FAFSA).

Your school will pay you directly (usually by check) or apply your loan to your school charges. You’ll receive the loan in at least two payments during the academic year.

Perkins loans share many of the characteristics of subsidized Stafford loans. The most notable differences are no fees and a longer grace period.

Eligibility

* You must attend a community college or a four- or five-year college at least half time and be working toward your degree.
* You must meet credit criteria.
* You must be making progress toward a degree.

Benefits

* High approval rates.
* Creditworthy cosigners may help you qualify for a lower interest rate. Creditworthy borrowers may request a cosigner release from the loan obligation after making 24 consecutive on-time payments of principal and interest. The account must remain current until the request for release is processed. Borrower credit qualification applies.
* High aggregate loan limits so you can borrow as much as you need to pay for the cost of your education as certified by your school.
* Easy online account management 24/7.
* Convenience of having all your student loans in one place and receiving one monthly bill when your Stafford loans are serviced by Sallie Mae.

Loan terms
Aggregate loan limits

Community colleges

* $50,000

Four- and five-year colleges

* $100,000 for undergraduates.*
* $150,000 for graduate students.*
* $220,000 for graduate health disciplines.*

*Includes all private student loan debt.
Interest rate

* Interest rates are variable and based on the Prime Rate.
* Manage your credit well and get a lower interest rate.
* Make interest payments during school so you have a lower amount to repay.

Repayment

* Standard repayment term of 15 years, with the option to extend terms (up to 30 years) for higher aggregate loan balances.
* Prepay your loan at any time without penalty.