Is Federal Student Loan Consolidation Useful?

Student Loan Repayment Liability

In today’s rising cost of education, college education is a mere dream without external funding. The repayment of college loans begin either at the fag end of the course or immediately after completion. Depending upon whether it is a subsidized or unsubsidized loan the interest factor is either borne by the government or delegated to the student to be paid immediately after availing the loan, while the principal repayment begins after the completion of the course.

Federal Student Loan Consolidation

Where all the federal educational loans taken by a student is consolidated into one single loan liability, it is called federal student loan consolidation. Only federal loans can be consolidated together, private loan cannot be combined with federal loans due to variation in the terms of loan. Federal loans are normally government guaranteed loans. They are need based loans; hence no credit check is required. These loans are offered at comparatively lower rates of interest. Repayment of federal loans is restricted to the principal amount in case of subsidized loans and together with interest in case of unsubsidized loans. It is important to note that the repayment of loan can be deferred ion case of financial crisis and a grace period is allowed within which one should start repaying the loan. Consolidating federal student loans is the best option to reduce the cost of loan and avail easier repayment terms. Both governments as well as private organizations offer consolidation programs.

Benefits of Federal Loan Consolidation

Consolidation of Federal student loan is extremely useful due to the following benefits.

• The monthly liability is reduced to 50% of your original payment.
• The repayment is simplified with only one consolidated payment per month
• Improves credit rating
• No application or process fee
• Consolidation results in .06% reduction in interest
• Online application can be made
• Reduced payments hence extra cash.