Tuesday, April 5, 2011

Government Student Loan Consolidation

Do you find that you are paying out more each month for various student loans than you can comfortably afford? Sometimes, bills can become overwhelming, and you need help in order to avoid default. In the case where you have used up all your deferment options, its time to think about a government student loan consolidation.

How about the situation where you have to pay several different student loan lenders at different times of the month? That could drive you crazy! Don’t crack up; instead apply for a government student loan consolidation.

With a government student loan consolidation, you have only one check to write each month – to the Department of Education. The first step is to use the Department’s online calculator to figure out what your monthly payments are going to be under the various plans available. 

Another reason to use a government student loan consolidation is to change from variable interest rate loans to a single fixed rate loan. The interest rate is calculated by averaging the loans being consolidated, but will not exceed eight and a quarter percent. The online calculator will figure this out for you as well.

Bear in mind that extending your loan via consolidation, while lowering your monthly payments, will increase the total size of the loan when interest is figured in. As long as a long-term increase doesn’t outweigh the current benefits of lower monthly payments, you are good to go.

Always look at how many payments are left before you decide to consolidate – if you have a relatively few payments to go, it might be best to avoid consolidation and just finish off your regular payments.

Besides the obvious benefit of having just one payment and one lender to deal with, another benefit of government student loan consolidation is that there are multiple repayment plans from which to choose. Two popular options are the Income Contingent Repayment Plan and the Income-Base Repayment Plan. Both plans are flexible and can change as your lifestyle changes. Best of all, borrowers can switch repayment plans whenever they choose.

Another nice feature of government student loan consolidation is that there is no maximum amount of refinancing and there are no fees. That’s right, consolidation is free!

Not only will you benefit from reduced monthly payments, you may qualify for a new deferment as well. This is especially useful for students who have already exhausted all their other deferment options.

No doubt about it, government student loan consolidation is a good thing!

© 2011 Hedge Fund Writer LLC

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