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School Loan Consolidation

School loan consolidation refers to the practice of putting all student loans into one unit and paying them off with one convenient payment.

Most students, even those with scholarships to their university, college or technical school need some form of financial assistance in the form of private of federal loans, and many graduates find that they are still paying off student loans well into the future.

For those students who have several loans, this can be quite burdensome, especially if these loans are grouped separately and the graduate has to keep track of several different payment schedules. With school loan consolidations, a lot of the headache of keeping track of student loans is eliminated, and school loan consolidation can save a lot of money.

Many students find that, after school loan consolidation, they end up paying up to 67% less a month. No wonder school loan consolidation makes a lot of sense.

There are two general types of loans available to students: private loans and federal loans. Private loans are usually given by the bank or another lending institution and have relatively low rates of interest and a longer period of time required to pay back the loan.

This is true of student loans granted by these private institutions, whereas regular loans may have more requirements. Federal loans have even lower rates of interest than private loans and longer periods before repayment is due.

Federal loans may lend lower amounts of money, so a student may have to get several federal loans to cover his or her education. However, many loans can be quite generous, depending on the type of loan rewarded. Both kinds of loans can be placed under one heading for school loan consolidation.

An important tip to remember for school loan consolidation is never to consolidate federal loans and private loans. The reason for this is that federal loans are granted at a much lower rate of interest, and consolidating a federal loan with a private loan may raise the rate of the federal loan.

Private loan rates cannot be lowered if they are consolidated with federal loans, and this practice is usually not allowed. Therefore, if you have one private loan and one federal loan, you will have to continue to pay them separately. However, if your loan packages consists entirely of federal or private loans, they can easily be consolidated for simple repayment.

There are many different kinds of school loan consolidation packages available, including:

~ Equal payments

~ Select 2 graduated payments

~ Select 5 graduated payments

~ Income sensitive payments

~ Extended equal payments

Equal payment is the most basic type of loan consolidation plan, and involves paying off the same rate of principle and interest every month.

The other forms of school loan consolidation are flexible and intended to meet the needs of the borrower. Select 2 and select 5 graduated payments are a good option for those who are still in school and are unable to spend a large amount every month on loans.

Select 2 graduated payments allow the borrower to pay only the interest on the first two years, and after that, the borrower will pay the regular combination of the interest and the principle.

Select 5 graduated payments allow the borrower to pay only interest for the first five years, a small percentage of the principle between the 3rd and the 5th year, and settle into a regular payment schedule after the five year period is completed.

Income sensitive payments adjust the payments according to the borrower’s income, and extended equal payments require lower premiums for a longer amount of time.

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