How to Get Student Debt Consolidation Loans

Considering the changes in the economy, student debt consolidation loans are needed for borrowers looking for a repayment plan to minimize their debt.

With recent college graduates in 2009 bearing the weight of student loans with varying interest rates coupled with a lack of employment, the need for college debt consolidation is not only pressing, but is mandatory. So how do you select appropriate student debt consolidation loans?

Before you consider combining your debt with one lender, you should thoroughly understand the student debt loan consolidation process.

Follow these steps to select the perfect student debt consolidation loan programs and lenders to release the burden of student loans and federal aid.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• a copy of your credit report
• list of competitive student debt consolidation loans programs
• a private student debt consolidation loans calculator
• list of debt consolidation lenders
• debt consolidation loan interest schedule

1. Determine your type of college student loan before interviewing various student debt consolidation loan vendors. According to a 2008 college Board study, 2 out 3 college students graduate with student loans. Understand that federal student loans cannot be consolidated with private debt. And federal student loans start accruing interest the moment you take the loan.

2. Select a student debt consolidation loan program based upon the lenders requirements and your ability to repay the debt quickly. All loan consolidations follow the same procedure, (usually under the auspices of the "Federal Direct Loan Consolidation" program) the advantage to the borrower is to find a loan consolidation program with a low interest rate, no prepayment penalty and generous incentives.

3. Consider your monthly student loan payments. Calculate your monthly income for a minimum of 3 years before considering student debt consolidation loans. Because interest rates vary, and can flow from low to high over the years, calculate your payments at the highest interest rate to ensure that your can maintain and meet your student loan repayment plan. Also, the standard repayment term for a federal loan is 10 years.

4. Ask your lender about various types of student debt consolidation loans or even a deferment. Starting July of 2009, the federal government is offering repayment plans that are income-based for undergraduates. Based on the borrower's yearly salary, the monthly payment for the loan is capped at a fixed percentage that corresponds with the borrower's income. For this program the monthly payment is no more than 15 percent of the borrower's earnings.

Tips & Warnings

• Student debt consolidation loans will give a borrower a fixed rate over the life of the loan.
• While student debt consolidation loans ultimately lower the monthly payment of your loan amount, a borrower must consider the additional fees and points that are added to the principal balance of the loan.
• Beware: Low payments with student debt consolidation loans mean additional interest over the life of the loan.
• In the past, federal student loans could be consolidated because of variable rates. Now that student loan rates are fixed, there are no benefits of consolidating a federal loan privately using a student debt consolidation loan.

Resources

• Student Debt Consolidation Loans
• Student Loans in the United States

[sallyemaycreate]

on 9/16/2009 Excellent information and advice! Well written... 5*