By: Mevish JafferA big part of having a successful career in the professional world of business is obtaining a college education. Unfortunately, many individuals are unable to pay for college due to the rising cost of attendance. As a result, they use various types of loans, including government student loans to finance their education. While these loans provide the best solution for them when they are struggling financially, many students accumulate a great deal of debt due to multiple loans by the time graduation rolls around. In addition to credit card bills, car payments and other types of every-day costs, government student loan debt adds to the financial burden many graduates experience at this crucial time. However, thanks to government student loan consolidation programs, individuals are better able to pay off their loans and get out of debt.
Government student loan consolidation works by allowing borrowers to combine or consolidate all of their outstanding school loans into a single new loan. In addition to dealing with one lender every month instead of multiple loan lenders, students also reap the following benefits:
- Lower monthly payments
- Reduced rates of interest
- Flexible terms and conditions
- Extra money (which can be used to pay off other creditors or bills)
All students with outstanding direct student government loans may be eligible for consolidation, although there are a few stipulations to be aware of. Along with having more than one government student loan, borrowers must also be in good standing with their loans. Specifically, students with over $10,000 in loan debt are able to qualify for government student loan consolidation. At the time of consolidation, borrowers cannot be enrolled for any courses in school. Additionally, the repayment period for consolidated government student loans are based on the borrower’s total loan amount.
The most popular method of searching for government student loan consolidation programs is through the Internet. The student loan market is very competitive, which is why most lending institutions advertise their services online. Shopping for consolidated government student loans on the World Wide Web also allows borrowers to explore all of their available options from the comforts of their own home. There are a few factors to keep in mind while shopping around for these types of loans:
1. Outstanding Debt
It’s important for borrowers to consider their outstanding debt when shopping around for a consolidated government student loan. They have to determine whether the lending company will pay off their debt in full, or if they will only cover a fraction of what is owed. Before granting the loan, lenders may also want to see the borrower’s proof of income. Individuals can usually provide past pay stubs as proof of their earning power.
2. Interest Rates
Another important factor to consider is the rate of interest that will be attached to the consolidated government student loan. Borrowers can generally choose between fixed and variable interest rates. For longer repayment terms, fixed rates are likely to be the better option, as borrowers can count on the payments to remain the same for the entire life of the loan.
3. Terms & Conditions
Before signing your name on the “dotted line,” it’s crucial to review the terms and conditions specified in the loan agreement. Some of the key points to evaluate include the duration of the term and any associated penalty fees that might exist.
Some specific types of loans that can be consolidated include Stafford loans, Perkins loans, Parent PLUS loans and other types of related government student loans. Along with consolidation, students can also find out if they are eligible for any government grants to help repay student loans. For the purpose of financing college related expenses, grants are typically awarded on a needs-basis to those who qualify.
