Student loan and consolidation
Can I come in Henry - asked George. Oh sure, please come in.- replied Henry. Well, you are still in the College Library It seems that, you have serious plans to go for higher studies after graduation.- George asked. Yes, I love to do higher studies in Earth Science Department in the local University. But, now-a-days, the expenses of such studies are rising day by day. I have earlier student loans too. Thats why I am little worried. - Henry was really little worried. George replied, Hey Henry, come on, make a smile. Do you know, you can opt for student loan and consolidation Forget about your earlier student loan and its return. Jolly well, you can consolidate the previous loan with a new one and you can move forward with your studies.
After the above conversation, it was great joy and a matter of great relieve for Henry. His good friend George showed him a nice way to tackle his problem. Now, Henry is free to go for higher studies in spite of financial constraints. The system of student loan and consolidation is in fact extending a great support for thousands of students while pursuing higher education as well other college/ university education including professional studies. Various student loans are available for studies. But, if a student is finding it difficult to manage such loans and in need of another loan, then obviously he can take the advantage of student loan consolidation.
What student loan consolidation really means It is nothing but merging of one or more student loans into a new one. The borrowers of student loans can amalgamate all the previous ones into one loan subject to fulfillment of some conditions. For the students of college and graduates of Universities, the student loan consolidation provides a good opportunity to consolidate the earlier student loans and thus making an easy repayment process. After consolidation, all the previous loans can be considered paid in full and thereafter a fresh loan will be started. In a nutshell, it can be described in one single line that, the student loan consolidation programme allows borrowers to combine outstanding student loans and thereby making himself free from the previous loan burdens.
Now, let us see how a student loan and consolidation is really helping a student. What are the benefits of student loan consolidation The borrower of the loan, i.e., the student can get different advantages out of it. First of all, consolidation is very convenient for the student. If there are multiple loans already exist, then there are multiple payment options every month. This will result trouble to the student as it requires lots of paper works. In addition to this, it is time consuming too. But, after consolidation, there is only one loan exists and thus only one payment option. Isnt it great Secondly, Consolidation of loans normally brings additional opportunities for the concerned student. This will give new dimension of choices and repayment possibilities.
This will bring flexibility to the borrower. This will help the student in pursuing education further, thus helping in finding new jobs. Thirdly, this will save the students money. The student gets a monetary relief. For, example, a student has three loans for which he is paying say, $200 p.m. to each one of the lender. That means, he is paying all together $ 600 p.m. whereas, if there is any consolidation later on, he has to pay much lesser than $ 600 p.m. usually, the payment after consolidation is much lesser than the combination of previous ones. I am sure, thats sounds great for you. Fourthly, both subsidized and non-subsidized loans can be consolidated. Moreover, although it is not advisable for some obvious reasons, the federal student loan and the private student loans can also be consolidated. Fifthly, the repayment period is extendable. Students can get sufficient period to repay the loans. It may even vary from ten to thirty years, subject to certain conditions like depending on how much the student owed. For example, for a loan balance ranging from $10000 to $19999.99, the repayment period is 15 years. For a loan balance of $20000 - $ 39,999.99 the repayment period is 20 years., etc. In addition to this, there are many more benefits of consolidation of student loans.
We have looked at various advantages of student loan and consolidation. Now, we should peep into the disadvantages part. Rather than saying disadvantages, let us term it as areas of concern as far as student loan consolidation is concerned. First of all, student loan consolidation generally increases the total cost of repaying the loan. This increase is significant as because, the borrower enjoys a longer period for repay of the same. As longer the period is, you have to pay more interests. The interest part is on a higher side if it is continued for a longer period. Secondly, once you enter into the consolidated loan, you can not make it unmade or exit later on. Earlier loan amount has already been paid to the lender and therefore, you can not say no to the consolidation, i.e. creation of the new loan and related repayment options attached to it. Thirdly, you may loose some money say in the form of discharge (cancellation) benefits, etc. in case you include a federal loan into consolidation.
Now let us see what kind of consolidate programmes are available for the borrowers. Normally, there are two different types of loan consolidation options open for the borrowers. The first one is FEDERAL LOAN CONSOLIDATION and the second one is DIRECT LOAN CONSOLIDATION. Federal consolidation loan is available through the Federal Family Education Loan Programme or in short known as FFELP. It is available from traditional lenders like Banks, lending Institutions and also private lenders. On the other hand, the direct loan consolidation is available through the Federal Direct Student Loan programme, in short known as FDSLP. This is available directly from the Federal Government, no other Institution or bank is involved in the later case. It is available for the borrowers who are out of School.
How to proceed with the loan consolidation process For this the borrowers have to contact either the loan service provider or the current holder(s) of the student loan during the grace period. The grace period is normally six months after the graduation or if the borrower has stopped attending School more than half of the time. The FFELP borrowers may consolidate with any other FFELP lenders. This is called federal consolidation. For this, the borrower should have at least two different loans. Even with a single earlier loan the holder may get a special benefit called single holder provision. On the other hand, direct loan borrowers may apply for either direct loan consolidation or Federal loan consolidation with the FFELP consolidating lender of the choice.
Some lenders offer this service through their Website too.
The step by step process can be as follows:
First, the interested person has to apply for the consolidation of student loan to the lender. The party has filled up and signs the application. Then the lender will go for a quality check, which means they will ensure whether all the information is filled in or not. Moreover it should compliance with the Higher Education Act and other provisions of various Acts of the land. Thereafter, the lender will ask for payoff statements. Payoff statement is nothing but a loan verification certificate (LVC) from the existing loan holders. This paper actually tells the amount how much the borrower owes earlier. It may take a time period up to sixty days. Therefore, an interested party has to submit loan consolidation application as early as possible. After successful verification of all papers, a new loan will be sanctioned. Then the new loan lender will pay off all other previous dues in full. Then some documentation part has to be done. Normally, it is not a very tedious process. Therefore, it is said that, loan consolidation is a smart idea of credit rating. It shows that, the borrower have successfully paid off all existing loan and thus reducing the number of loans. But, remember, as already discussed the high interest rate part has to be taken care off.
Can a person consolidate the loan of his spouse The answer is no. A person cannot consolidate his personal student loan along with his spouses loan together and then consolidate. But if parents have loans for the study of their children, then they can go for consolidation. Moreover, if a borrower has already a loan consolidation, can he try for another consolidation This is a very important question. In case, a borrower has consolidated in the past with someone except the Department of Education in US, then he is not allowed for another consolidation. But, if there is a new loan which is not included in the earlier consolidation then there is a possibility.
What is the procedure for repayment of consolidated loan The first payment is due within sixty days from the date of consolidation. Later on the other installments can be paid through different schedules such as, Standard payment, Graduated payment, Income- sensitive payment, extended payment, etc. For example, standard payment means previously fixed monthly payments over a fixed period of time. Graduated payment means payments which will increase gradually at later stages. Income-sensitive payment mode is based on the annual income of the borrower.
So, to proceed for student loan consolidation, the best time for an interested student is immediately after the graduation. Before the grace period ends, he/she should apply for student loan consolidation. This will never hamper the student from financial point of view. It is indeed a great option for the students to continue the studies and also to get relief from different dues and payments payable to different agencies. Depending on the loan amount, the student will get a comparatively good period of time to repay loans. It is certainly a great support and financial help to the students and their parents.
Other Articles
