Consolidated Federal Loan Downsides

Category: Finance, Credit.

If that is what it takes to improve your life, you should be proud you did it. These programs will combine multiple loans into one loan which not only will save you money but it cuts out the hassle of multiple payment to multiple lenders.

Fortunately for all of us stuck with student loan debt there are federal student loan consolidation programs that can cut your student loan payments in half. Consolidation Backed By Federal Government. If you have Stafford loans, you have a variable interest rate that adjusts annually. Federal student loan consolidation is backed by the federal government and allows you to extend your repayment terms. When you opt to consolidate, you get the choice to lock in at a low rate and there are many offers out there that will charge you no fees. There are many competing financial institutions that are competing for your money and that puts you in the drivers seat.

They want your business and you should shop around. You want to insist on the best possible deal on the market. Sallie Mae is a government institution that offers a Best Rate Promise. They guarantee you that they will give you the lowest official student loan rates available to you when you consolidate. Consolidation Loans Federal Providers. If you have just graduated and your loans carry a variable rate you want to consolidate before your six month grace period ends. If you put it off until after the grace period your rate will be more like 125% to 25% .These rates vary, so check them out carefully before you buy.

If you consolidate your loans before the end of the six month grace period ends, many of you can lock in 625% or 75% interest rates. Consolidated Federal Loan Downsides. When you consolidate your loans, it lowers your payment by extending the amount of time you have to pay off the loan. Federal student loan consolidation does have a downside. With federal student loan consolidation you get to choose if you want a standard repayment in which your monthly payment for the life of the loan is fixed. There is also an income sensitive repayment in which your payment is determined by your income. If you opt for graduated repayment your payments start low and increase at intervals specified by the lender.

This type of consolidation will increase as your income increases. No matter what type of loan you choose the federal rules governing student loans set a minimum payment of fifty dollars. Watch Out For Minimum Payment Schedules. These rules are relaxed for the income sensitive repayment option. The payment always stays the same. The most popular choice is the standard repayment.

If you choose any loan beside the standard repayment, it does not mean you are locked in. The option may still be open but it depends on the terms of your loan. You do have the option of changing your mind and applying for one of the other types of loans. You can always contact your lender for a full review of your options.

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