Elaborating My Experience with Consolidating Student Loans

Elaborating My Experience with Consolidating Student Loans

After I graduated I quickly looked into consolidating student loan debt to see what options I had. I have read many consolidating student loan experiences and some of them are heart-breaking while others serve as practical advice on how to obtain them and make arrangements to pay. Again, I have read many different experiences with consolidating student loans and this is just my story and experience doing this. This is for anyone interested in consolidating student loan debt and these are my experiences with it.

Most colleges offer a variety of loans. Some are federal and some are private. Always go with the federal ones as a rule because they can be consolidated more easily and you are more likely to get a fixed rather than variable rate. A fixed rate will not change over the life of the loan, though interest will still accrue and capitalize. A variable rate fluctuates, and is much less secure, similar to credit card debt, and you my quickly end up paying 15 percent or more in interest before you know it. Remember fixed rate is always better. Variable rates come with private loans and are not as good. Again, private loans are like credit card debt, unsecured and often with bad terms and variable rates.

The reason why the interest rates on each of your loans are important is because when you go to consolidate your loan your interest on every loan you’ve taken out will be weighted as a proportion of the interest rate to the total amount of loans. So this weighted average is the percent of the interest rate that you will pay and in most cases it will be fixed, if it is an eligible federally consolidated FFELP loan. They take the interest rates of all of your loans and calculate a weighted average to arrive at the interest rate for your consolidation. Some have separate consolidations for subsidized and unsubsidized portions. Also, you must also choose a payment plan. See the most recent plan for low-income borrowers called Income Based Repayment. This went into effect on July 1, 2009-so take advantage of it if you qualify. Usually you have to have a certain type of Federal Loan to apply for it. Private loans, always to be avoided if possible, are not covered.

Right now the law only allows you to consolidate once, and you can’t discharge your debt in bankruptcy. The good thing about consolidating is that it may simplify your finances by giving you only one payment to make instead of one for every loan you ever took out. You can imagine this makes it easier to keep track of it, and can make your payment that much easier because you don’t have to write a check or log into 3 different websites every month to make loan payments. Proper knowledge about hoe to take the students loans can be gathered from Omalaina websites. It will eliminate the need of checking the repayment of the loans. 

As for me, I was offered a rebate after making just one initial payment (which triggers the accrual of interest). I had no less than dozen different loans, guarantors and lenders-so I crunched them all together into one loan to have one lump payment every month. If you have multiple lenders, guarantors and originators-you might want to consolidate to make for easier simpler single payments rather than multiple ones.

The best advice is to shop around. Look for the best set of options for your situation. Examine loan repayment terms, rebates if there are any, and always read every bit of fine print that you receive before signing anything. You will likely sign another master promissory note for the consolidation. You’ll then get set up with a payment processor and that is where you will make your payments from then on.

Again, loan consolidation is good for those who want one single payment instead of scrambling around to make several different payments every month. Another thing to consider is how it may affect your credit score. Sometimes it helps, sometimes not, and this has to do with debt-to-income ratios and the number of accounts in good standing on your credit history. It will bring many of your accounts into good standing as paid in full, but will not improve your debt-to-income ratio unless you get a better job or pay off all or part of the loan or hopefully both.