Consolidation In A Nutshell

Heres an article that sums up student loan consolidation in a nutshell. Happy reading!

"Student loans are loans that are offered to students to assist in payment of the costs of professional education. The government of the country offers these loans and at a very low rate of interest.

Student loans are a great help to students who plan to do further studies, in their own country or abroad, but lack the requisite funds to do that. In this way student loans not just assist the student but also his family.

Many institutes and universities offer student loan. There are different types of student loans. So there are several options available for students to choose from. Broadly there are two types of loans available: Federal loans and Private Educational Loans.

The students opting for Federal Students loan program are funded and administered initially through the US Department of Education’s Federal Student Aid Programs. These loans are the easiest to get student loan consolidation services. The Federal student loan programs disburse about $60 billion a year. Stafford loans are the most common form of federal loans for students.

Private student loans are administered by standard lending institutions. The most commonly opted loans in this are Sallie Mae Signature and the Citibank student loan. These organizations provide unsecured loans to a student and charge hefty interest on it."

Great Site!

A great website for student loan consolidation articles.

Who Can Consolidate?

"Both student and parent borrowers can consolidate their education loans. (Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.)

Married students are no longer able to consolidate their loans together. This provision was repealed effective July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005.

Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.)

Parents, however, can consolidate PLUS loans at any time."
-fin aid-

Rates can be announced...

This government site says the following…

The May 30, 2006, U.S. Treasury auction on the 91-day Treasury bill set the rate at 4.843 percent. As a result, the interest rate for the one-year period beginning on July 1, 2006, for most existing Federal student loans for borrowers who are in-school or who are in a grace or deferment status, will be set at 6.54 percent. Loans for borrowers in repayment will be set at 7.14 percent. This is an increase over the current year's rates of 4.70 percent and 5.30 percent, respectively.

A reminder to consolidate student loans

"Just as hurricane season comes every year, so, too, does the quandary of whether students and their parents should consolidate student loans.

This year the answer is fairly easy for most borrowers: Yes."
-seattle p.i.-

End of single holder rule

"The end of the "single holder rule" comes at an auspicious time. On July 1, the rate for federal Stafford loans will rise to 7.14% — the highest rate since 2001 — from 5.3%. But borrowers who consolidate their loans before July 1 can head off the increase. If you're already making payments on your Stafford loans, you can lock in a rate of 5.375%. If you recently graduated and are still in your grace period — the six-month interim before you're required to start making payments — you can lock in an even lower rate of 4.75%.

Even before Congress killed the single holder rule, borrowers were being blanketed with marketing pitches from lenders eager to consolidate their loans. Look for those efforts to accelerate now that borrowers can consolidate with any lender. While competition is a good thing, exercise care in selecting a lender, because loan consolidation is a long-term commitment.

Federal rules bar most student loan borrowers from consolidating more than once. Once you consolidate with a lender, you're stuck with that lender until you pay off your loan, says Keith New of the American Education Services, a student loan lender. For borrowers with loan balances of $60,000 or more, that could take up to 30 years, so you need to select a lender you can live with."
-USA Today-

Congress passes emergency law

"Borrowers scrambling to consolidate their student loans before interest rates rise on July 1 will have more options in choosing a lender.

An emergency spending bill signed Thursday night by President Bush abolishes a rule that has required borrowers who have all their federal student loans with one lender to consolidate with that lender.

Under the new law, borrowers will be able to consolidate with any lender.

The change comes as borrowers are nearing a key deadline. On July 1, the interest rate on federal Stafford loans will rise to 7.1% from 5.3%. Borrowers who consolidate loans they're already repaying can lock in a rate of 5.375% for the life of their loans.

Those who are in their "grace period" — the six-month interval between graduation and the time they're required to start making payments — can lock in an even lower rate: 4.75%.

The change will benefit smaller lenders who are seeking a slice of the loan-consolidation business. Rates for federal student loans are set by the government, but many lenders offer discounts and incentives. Most of those lenders will reduce the rate by a quarter-point if borrowers arrange for automatic withdrawal from a bank account. Some will reduce the interest rate after a borrower has made a specific number of on-time payments."
-USA Today-

Senate Approves Emergency Spending Legislation

"The U.S. Senate today by a vote of 98-1 moved to approve a $94.5 billion FY06 supplemental spending bill (HR 4939), clearing the measure for signature. The legislation includes language to repeal the so-called 'single holder rule' which governs who may make a FFELP consolidation loan and would also reinstate a provision revised by the Higher Education Reconciliation Act which allows a FFELP borrower to consolidate his or her loans in the Federal Direct Loan Program if the borrower is unable to obtain a FFELP consolidation loan with income-sensitive repayment terms acceptable to the borrower.'"

Lock in low student-loan rates

Attention college students, recent grads and their parents: Interest rates on federal student loans are set to jump on July 1. You have just two weeks to consolidate and lock in a lower fixed rate.

If the above reads like an advertisement from a loan consolidation company, it's because my e-mail has been flooded with offers over the past month. Consolidation is big business even for giants like Sallie Mae and the U.S. Department of Education itself. But the catch here is there is no catch. The ads are pretty much dead-on.
Interest rates on federally subsidized loans like Stafford and PLUS are reset every July 1 and this year will rise substantially. Stafford loans will go to 6.8% from 4.7% or 5.3% and PLUS loans will go to 8.5% from 6.1%.

By consolidating you can lock in a rate based on the weighted average of your outstanding loans. And since the repayment period will be extended from, say, 10 years to 15 or 20, your monthly payments will drop substantially in addition to the interest-rate savings.

"I would say for 80% of people it's a slam dunk," says Stephen H. Joyce, director of student aid at Bowdoin College in Brunswick, Maine. Seniors, recent grads who still have substantial debt and parents paying off PLUS loans all stand to save thousands.
-MARSHALL LOEB'S DAILY MONEY TIP-

Students! Act Now!

"Right about this time every year, many college graduates begin to face reality. They realize they now have to start paying back their student loans.

For many, it's the first time they've really paid attention to how much they've borrowed and their options for paying it back.

For example, here's a query I received during a recent online discussion: "My girlfriend will finish graduate school soon with almost $80,000 of debt. Mostly it's federal loans. Do federal loans have to be paid off in 10 years? Given that her field doesn't pay very much for starting positions, what advice would you have?"

What a nice boyfriend this guy is to be so worried about his honey. And he asked because his girlfriend doesn't know.

But how do you borrow $80,000 and not know your payment period?

To find out your loan terms, go to the source: your lender. You can also find details of your student loans, including current balances, by going to the National Student Loan Data System, which is the U.S. Department of Education's central database for student aid. The Web site is www.nslds.ed.gov."
-the color of money, military money website-