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School Loan Consolidation

When the pressures of carrying multiple student loans becomes overwhelming, school loan consolidation can help borrowers reduce interest rates, save money, and simplify the payment process. School loan consolidation involves individual college loans made by different lenders with differing terms being rolled into one loan with a lower interest rate paid by a single monthly payment. The amount of time to repay the loan is usually extended beyond the periods specified in the original separate loans, and payments are usually lower as a result. School loan consolidation helps borrowers manage their debt, better keep up with their payments, and avoid defaulting on their loan.

All of the information relating to each individual student loan should be reviewed to determine the lender, interest rate, and type of loan. Only federal loans (Perkins, Stafford and PLUS) are eligible for federal student loan consolidation. Other loans must be handled in a private consolidation loan which can include federal loans if necessary. Since all federal student loan consolidation programs are essentially the same, customer service and incentives between several federal school loan consolidation lenders should be compared. Having the opportunity to receive a reduction in interest rate after regular payments over a certain period of time, for example, would be an important incentive. When it comes to federal loans, the lender who will cost the least and give the best service and incentives is the right choice.

In these uncertain economic times, it is important to know a school loan consolidation lenders background and credibility before borrowing from them. Having a clear understanding of the repayment incentives they offer, fees involved with missed or late payments, and what their process is for filing for a deferment can help save money in the long run. For convenience sake, it may also be helpful to know if the lender offers services such as online bill pay, applications for deferments, forbearances and graduated repayment plans.

Once an application is filed, the process often takes two months or more to complete. Remaining in contact with the lender is helpful, particularly to stay abreast of where the application is in the approval process. In the meantime, monthly payments to current lenders on all loans should continue. A school loan consolidation lender should only be decided upon once every aspect of the lender, the loan process, and the borrowers needs has been researched and is well-understood.