The good thing about fixed rate student loans is that students only need to pay to one lender and the repayment period is longer. This can be achieved by consolidating their existing educational loans. However, debt consolidation also has its share of disadvantages. It is indeed beneficial, but it is not suitable for everyone.
Suppose you have four federal loans and one private loan. Once you have graduated, you are obliged to repay all of the funds you borrow. Indeed, repaying them is not as easy as applying for them. But if you can afford to repay all of your debts with no difficulty, then you do not need to apply for loan consolidation. However, if you are not financially strong, student debt consolidation loan may just be the ideal solution for you.
On the other hand, you should keep in mind that the longer the repayment period, the higher the interest rate. In most cases, the repayment term ranges from 10 to 30 years. During these years, you can cut monthly repayments by 34%. Still, with this method, you will have to pay twice as much in the end.
If you want to consolidate private loans, you should ask the lenders whether or not they provide private consolidation loans. Generally, only federal educational loans such as Perkins, Stafford, HEAL, PLUS, and Direct loans can be merged into one master loan. Yet some lenders make exception to offer private consolidation loans for college students.
By consolidating your loans, you will get fixed rate of interest to pay which is resulted from the weighted average of the interest rates of each of your financial aids. You may end up with a slightly higher or lower consolidation rate of interest since the rate is rounded up to the nearest 1/8 of a percent.
Parents of students can also apply for the student debt consolidation loan. But you need to remember that parents and students cannot merge their loans into one master loan since per 2006, only loans from the same borrower can be consolidated. This regulation also applies to married students; they also cannot combine their loans. To apply for student debt consolidation loan, one will not be charged with any fees. It is totally free of charge. If by chance you come across a program that requires you to pay a certain amount of money when applying the debt consolidation, it might be a scam.