What You May Not Know About Consolidating Student Loans

What you​ May Not Know about Consolidating Student Loans
Refinancing education loans can be so simple and attractive that many borrowers tend to​ overlook some critical points about student loan refinancing. Sometimes what you​ dont know can save you​ a​ great deal of​ money,​ time,​ and frustration. Below youll find a​ few little know facts that can save you​ big bucks when refinancing your education loans.
Consolidation Loans have a​ fixed interest rate versus a​ variable interest rate
Most education loans have a​ variable interest rate which can mean significant changes in​ the​ monthly payments if​ interest rates increase as​ they did on​ July 1st,​ 2018. With a​ fixed interest rate,​ the​ monthly payments and total payoff balance is​ a​ set amount. Some education loans such as​ the​ Perkins Loan and the​ HPSL Health Professionals Student Loan are fixed rate loans. Before consolidating its important to​ weigh the​ repayment benefits of​ rolling these kinds of​ loans into the​ consolidation.
Consolidation lenders vary significantly in​ terms of​ moneysaving incentives
What separates one lender from another when it​ comes to​ consolidating education loans are the​ types of​ incentives each offers. Lender incentives can greatly reduce monthly payments and the​ total amount owed over the​ lifetime of​ the​ loan. Many lenders offer incentives for autodebit payments,​ but rarely more than . 25%. Another standard incentive is​ a​ 1% reduction in​ interest rates after 36 months of​ ontime payments. When shopping for a​ lender to​ consolidate your education loans,​ look for one that goes above and beyond these standards. ScholarPoint for example,​ offers an autodebit interest rate discount of​ . 50% and a​ 1% reduction in​ interest after only 24 months,​ a​ full year earlier than the​ norm.
Your loans must be current in​ order to​ consolidate education loans
If youre behind on​ your loan payments,​ youll need to​ get caught up before refinancing. Once you​ refinance,​ you’ll most likely enjoy much lower monthly payments to​ ease your budget once you​ are caught up.
Private education loans and federal education loans cannot be combined when refinancing
While federal student loans are funds lent by the​ government,​ private student
oans are those offered by independent lenders and tend to​ have a​ higher rate of​ interest. Those who have both types of​ education loans will need to​ secure 2 different consolidation loans. Its best to​ consolidate federal education loans first and then start the​ process of​ consolidating your private education loans. you​ can however,​ consolidate federal subsidized and unsubsidized loans together. They do need to​ be tracked separately,​ but a​ quality lender will take care of​ this for you.
Your deferment and forbearance limits start over when you​ consolidate
One of​ the​ most important benefits of​ education loans is​ that they allow students to​ put their loans in​ to​ deferment or​ forbearance status during difficult times encountered while building their careers. When you​ refinance,​ you​ are essentially getting a​ whole new loan,​ meaning that your deferment and forbearance limits are reset.
Consolidating during the​ post graduation grace period allows you​ to​ lock in​ the​ lowest rate
Interest rates during the​ grace period 6 months after graduation are . 60% lower than after the​ grace period when loans move into repayment status. Consolidating before the​ grace period is​ over helps to​ lock in​ this much lower interest rate. Its best to​ start the​ consolidation process soon after graduation to​ ensure that there is​ adequate processing time. you​ can specify that your new consolidated loan begin at​ the​ end of​ your grace period so that you​ may enjoy both benefits.
Borrowers can no longer reconsolidate student loans
For many years,​ borrowers have had the​ opportunity to​ reconsolidate their education loans if​ they were unhappy with their lender or​ found a​ better loan offer elsewhere. as​ part of​ the​ Federal governments July 1st 2018 student loan changes,​ borrowers now face major restrictions when it​ comes to​ finding a​ new lender for already consolidated loans. Unless you​ plan to​ take out new loans that would allow you​ to​ reconsolidate,​ it​ pays to​ shop around and find a​ lender you​ are going to​ be happy with because you​ only have one opportunity to​ consolidate.
Refinancing education loans is​ one of​ the​ easiest ways to​ lower monthly bills and make paying back your college education affordable. Keeping these little known facts in​ mind can save you​ a​ great deal of​ money and make consolidating your education loans a​ smooth and simple process.

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