Student Loan Consolidation

Student loan consolidation makes sense for many. With student loan consolidation, savings of 60-percent may be had. Student loan consolidation helps college graduates get off to a good start in regards to a sound financial future.

The two most typical kinds of student loans are private loans and loans that are administered initially through the US Department of Education's Federal Student Aid programs. The federal student loans are the one most conducive to consolidation. Private loans can also be consolidated but need to be kept separate from the federally consolidated student loans. Federal student loans equate to about $60 billion a year in loans, work-study support and grants.

When is the best time to take out a student consolidation loan? The best time to consolidate is during the grace period on your loans. This allows you to lock-in the lower in-grace interest rate. It is also important to keep federal and private loans separate for consolidation purposes.

The most common kinds of federal student loans are Stafford loans, though other federal student loans, such as through ROTC may be had as well. Citibank and Sallie May offer private student loans which are basically unsecured loans.

National Center for Education Statistics shows in a recent study that about 50% of recent college graduate have student loans, with an average student loan debt of $10,000 and the cost of attending colleges and universities increases twice the inflation rate. This says that there are not only more student loans but more consolidation happening than ever before, as well. It must be noted here though that student loans are not the only options. Scholarships, grants and other financial aid need to be figured into the overall picture.

There are some typical requirements for student loan consolidation. Some of the requirements is that the graduates may no longer be going to school (such as going less than ½ time), the graduate must be in the grace period of the student loan or actively repaying the loan and a minimum of $10,000 is required by most student loan consolidation companies.

Some advantages of federal loans over private loans

Some federal loans can be forgiven in exchange for certain services
Federal loans can be deferred for those going back to school
Interest on federal loans is tax deductible

For these good reasons mentioned above it is important to keep federal and private loans separate when it comes consolidation time. Mixing the two would lose all of these advantages. Medical student loan consolidation falls into a different class, which we'll discuss at a later time.

No matter what your student loan consolidation needs, though, it is important to weigh your options, figure out what works best for you and then take action. Passivity can cost you dearly in this case.

Another advantage of student loan consolidations is the building of positive credit for one's FICO score. The FICO score is important when the student decides to leave school or graduates and wants to buy a home. Higher FICO scores means lower interest rates on home loans. So, there is a correlation between student loan consolidation and homeownership.

Fiction: Student loan consolidation especially for those wanting to someday get a home mortgage loan makes no sense. Why consolidate when you can keep your money and debt spread around so that you don't really know how much you earn and how much you owe. Don't underestimate the power of denial as this is a beautiful thing. In fact, if you see a financial planner in the street, why not give him or her a swift kick in the crotch? Of course, run away so that you don't get caught. And, run away from your money problems, too. If you run fast and hard enough they will never catch up with you. Ever.