Finance and Credit Professional

Once a grantee needs to start paying his student loans, it is advisable that he seek loan consolidation. Student loans usually have varying interest charges, but with consolidation, the grantee is commonly locked into a lower interest rate and installment amounts, and therefore a loan easier to pay.

The Process Of Consolidation

Loan consolidation is simply taking out the existing loans from lenders and pooling them into a single loan. Taking out means the consolidator pays each lender a balloon payment for the outstanding loan balance, thus assuming the loan risks. The consolidator then restructures the loan, resulting in lower repayment amounts, but usually a longer payment term. However, a consolidator may maintain or even lessen the rates, depending on the creditworthiness of the loan grantee. The terms vary on a case-to-case basis.

Types Of Government Student Consolidation Loans

Generally, two types of government student loan consolidation schemes. The first is direct consolidation loans. This is making payments directly to the US government Department of Education, bypassing any bank or secondary lending institution that may have lent you the monies firsthand.

The second scheme is the FFEL (Federal Family Education Loans) consolidation loan program. This government student loan consolidation scheme uses a new lender between the original lender and the federal government. Included in this scheme are standard student loans such as Stafford loans, PLUS loans and Perkins loans.

However, some states also offer government student loan consolidation programs funded from the state treasuries. They are also competitive programs in terms of repayment and interest, often tailor-fitting the plans to unique state or university requirements.

States without state-funded programs such as Alaska, Arizona, Hawaii, Indiana, Kansas, Maryland, Mississippi, Nevada and Wyoming use USA (United Student Aid) Funds as the national guarantor of their government student loan consolidation programs.

Benefits of Direct Consolidation Program

In this program, government-subsidized loan interests continue to be subsidized, and exhausted deferments might be renewed. These benefits are not readily available in any other private or government student loan consolidation programs. Private programs usually tack on additional interest charges for taking out loans for consolidation.

Benefits of State Student Loan Consolidation

Being more place-specific, state loan consolidation programs are generally more forgiving and flexible. Many states offer benefits for on-time or advanced payments, reduce interest rates on diminishing balances or direct withdrawal repayment methods, or include deferment options for qualified students in their menu.

In many instances, your state can offer the best government student loan consolidation options. Be sure not to skip exploring them.

In conclusion, whichever way one may look at it, availing of a government student loan consolidation program, whether state or direct, will benefit the loan grantee trying to pay off his student loans in many ways beyond simply reduced worries and hassle.

l.e.g.rondina

Related News

Manulife Financial Corporation reports first quarter earnings (PR Newswire via Yahoo! Finance)
Manulife Financial Corporation today reported first quarter shareholders' earnings of $986 million and earnings per share of $0.63. These results include the one-time charge to earnings of $69 million related to an asset realignment undertaken to more appropriately position Manulife Financial's assets under the new financial instrument accounting standards which became effective January 1, 2007. ...more

Panel highlights pitfalls in home mortgage industry (Stamford Advocate)
FAIRFIELD - The lure of home ownership can be a strong motivator to clean up a less-than-stellar credit rating, pay off debt and save for a down payment. ...more

The American dream fizzles - Canarsie suffers from subprime mortgages and foreclosures (24/Seven)
An extremely high rate of foreclosures in Canarsie mirrors a high rate of subprime mortgages in the neighborhood. ...more

Repair funds approved for MUW art building (The Commercial Dispatch)
The Federal Emergency Management Agency has allocated $1.8 million to help repair Mississippi University for Women's tornado-damaged Fine Arts Building. ...more

Subprime Mortgages, International Effects (CBS News)
While subprime mortgages and the lackluster housing market are hurting many in the U.S., there are international effects as well. "Up to the Minute" Contributor Peter Allen explains. ...more