How To Consolidate Your Student Loans

Most students struggle to pay off student loans after they have graduated from school. A few of the lucky ones have only one loan to pay off, but in order to finance their education many students have had to take out several separate loans. When it comes time to pay them back, it can be confusing and costly.

The good news is that there are Federal Student Loan consolidation programs that are available to consolidate all types of loans taken for education and to help the borrower save money in the process. When the process is complete, only one lower payment per month is due.

  1. Eligibility - Anyone with more than $10,000 in outstanding federal student loans who is not in default is eligible. Employment, collateral, a credit check or a cosigner is not necessary to obtain a consolidated loan.
  2. Types of loans to be consolidated -  Most Federal Student Loan consolidation programs can consolidate Stafford Loans, Federal Direct Loans, HEAL/HPSL Loans, Federal Direct Parent PLUS Loans, Perkins Loans, Nursing Loans,  Federally Insured Student Loan, Auxiliary Loans to Assist Students, National Direct Student Loans, and Loans for Disadvantaged Students among others.
  3. Best time to consolidate - Loans can be consolidated while in the six month grace period after graduation or while they are in repayment. However, the best rates are to be had during the six month grace period. The loans still won't need to be repaid until the end of the grace period and a lower interest rate will be charged than loans that are already in repayment.
  4. Finding the right consolidation program - Compare the rates from several different programs before choosing one. A search for "student loan consolidation" in a search engine will yield many results. Student Loan Consolidator, Next Student, and Sallie Mae are a few of the places that offer the service. Most of the programs are very similar, but it is still best to check a few out before applying.
  5. Earning a lower interest rate - If on-time payments have been made consistently for a fixed period of time - say 36 or 48 months - many lenders will reduce the rate of the loan by one percentage point. That is a big incentive to make on-time payments. It is best to find a lender who offers this benefit.
  6. Keep paying current loans during the process - Once an application has been accepted, the lender will request payoff statements from all of the current loan holders. This can take as long as 60 days to happen so while waiting, continue to pay the current student loans. Only when a new loan has been taken out and the new lender sends notification of when to begin new payments should old loan payments stop.
  7. Additional discount - Some lenders offer a small discount such as .25% for allowing payment to be directly taken from a checking account. Over the life of a loan, .25% can be quite a bit of money, so it is wise to consider this option.


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