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Tuesday, February 17, 2009

Student Loan Consolidation Benefits

By Michael Fleischner

If you are attending college and have taken out student loans, then you may be thinking about repayment. The good news is that repayment does not have to be difficult. There are many options and a great deal of flexibility involved with the repayment process. If you have more than one loan, then student loan consolidation is for you.

Loan consolidation is the process of reducing your many loans from different lenders and issuing a single loan from a new provider. There are significant benefits in loan consolidation, resulting in lower monthly payments and much less paperwork.

When taking advantage of loan consolidation, you have a single lender and one monthly payment. One of the benefits of a consolidated loan is that you often have a few repayments options to chose from. Make sure you research these options and decide which ones work best given your current ability to pay.

Student loan repayment options include standard repayment. This is where you make a fixed sum payment. Most student loan repayment periods are for ten or fewer years. If the monthly amount is too much for your budget, a second option is to extend your payment for a longer time period of time. The last repayment option is to pay a graduated amount during the repayment process, stepping up about every two years.

With graduated repayment, you make payments over an extended time period, much like the extended repayment option, but payments are not fixed. Each year, or every two years, your payment amount increases. This graduated payment schedule is ideal for individuals who need the lowest repayment option available early in the repayment process.

Consider that once a loan is consolidated your interest rate is fixed even though graduated repayment requires a change in this rate every two years. This means that you must make an equal payment each month. This is important when you are repaying a consolidated loan or any loan for that matter. Not repaying your loan in a timely manner can result in default, hurting your credit rating and ability to borrow.

A great way to make your payments is by deciding on the right repayment option to meet your need. One popular method is to set up a direct withdrawal from your account every month. This automatic process simplifies your payment and ensures that you never miss a payment. The sooner you set up the automatic repayment process the easier it will be to make your monthly payments.

When you begin repaying your student loans, consider loan consolidation. Student loan consolidation simplifies the repayment process and gives you flexible repayment options. Consider a budget that allows you to make your payments in a timely manner. More importantly, find a reputable lender who can work with you as you enter the workforce and seek to pay your debt.

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