consolidate student loan

Student Loan Consolidation is a procedure in a result of which several loans are combined in single one and the borrower pays monthly payments to one lender. Consolidation can be applied for the most part of federal loans like PLUS loans, Stafford loans, Perkins loans etc. there are also certain private loans which can be consolidated.

The principle of loan consolidation is the following: the amount of monthly payments is less because the term of repayment is extended more then 10 year. 10 years is the standard term for federal loans. The term of repayment can be prolonged from 12 years till 30 years. Some borrowers consider such procedure rather helpful. But even if the monthly payments are less, the total amount which must be paid is increased.

The interest rate of consolidated loan is the average rate of interest rates of all loans which were consolidated. The interest rates also depend upon the time of consolidation. If this procedure were done before the beginning of repayment, then the borrower can get lower interest rate and save near 0.6%. If the consolidation were done during the repayment, then there is no possibility to get lower interest rate.

So, in general loan consolidation makes the process of repayment simpler, but it doesn’t reduce the amount of repayment. In order to get it, there are several alternative ways like income contingent payment, gradual payment, and extended payment.  These methods cause the increase of interest rates, but this increase is les then one of consolidation.