Consolidating school loan debt

Your repayment term will generally start within 60 days of when your consolidation loan is first disbursed and will be based on your total federal student loan balance, among other factors; click on the link below for more details.[Back to top] Applying for consolidation takes most borrowers less than 30 minutes, according to the Federal Student Aid website.They also probably haven’t saved for all of the “unexpected events,” which will eventually become debt too.

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If you're consolidating with the federal government, consolidating your loans means combining your multiple federal student loans into one new federal loan, called a Direct Consolidation Loan.

You have some flexibility in picking your loan term, but you'll simply receive an interest rate that's a weighted average of your existing rates.

So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.

Additionally, you’ll get a new loan term ranging from 10 to 30 years.

Consolidating your federal loans through the Department of Education is free; steer clear of companies that charge fees to consolidate them for you.

When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.

Myth: Debt consolidation saves interest, and there’s one smaller payment.

Truth: Debt consolidation is dangerous because it only treats the symptom.

As part of the process, you’ll need to provide details about your existing federal student loans, and choose a federal loan servicer and repayment plan for your new consolidation loan.

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