Student loan debt consolidation is right for you if it can lessen your debt burden by reducing interest rates and the number of creditors.
If you’ve paid back your student loan debt but find it difficult to set aside some amount of money for other debts there are ways to reduce to your debt load. You can consolidate your student loans or refinance the student loans. There are two main benefits of student loan consolidation.
By consolidating student loan debt you can reduce the interest rates, which means reducing your monthly payments and overall debt. In addition, you only need to deal with one creditor, which will help you track your payments or renegotiate your loan for some reason in an easy way.
Federal and Private Student Loans
There are two different types of student loans: federal and private. Federal student loans, such as Stafford Loans, are administered through Federal Student Aids programs. These loans offer benefits such as lower interest rates, tax deductible’s interest, and deferred payments until after graduation. They can also be easier to consolidate after graduation.
Private student loans are offered by commercial lenders or banks, such as Sallie Mae Signature students or Citibank student loans. These loans are usually unsecured and charge higher interest rates than their federal counterparts. You can take these personal loans if the federal loans cannot cover the total costs of your study.
So, it’s important to consolidate federal loans and private loans separately. Consolidate all your federal student loans first, and then separately consolidate your private loans. If you were to mix the public and private loans you would have to take out a single private loan that loses all the benefits of the federal loans.
Student Loan Debt Consolidation Steps
If you want to do student loan debt consolidation you need to check your eligibility to the loan. To be eligible for the consolidation loan you
- have to be out of school,
- must be in the grace period of the loan, or must already be making repayments.
If you have taken both federal and private student loans, you should never consider consolidating them into a single package. You can consolidate federal loans at lower rates because they have government backing. In case you have more than one federal loan you can consolidate all the loans together.
Once you solve them you can then head for the private ones. This way can save you money because you can keep all the benefits of the federal loans.