How to Consolidate Student Loans

Consolidating student loans allows you to take your student loans and roll them into one loan payment structure. A consolidated loan will average out your interest rates and payments, allowing you to pay less per month, even if it takes more time. However, the process of getting your loans consolidated can be complicated, so it is important to break it down into manageable and easy steps.

Preparing for Student Loan Consolidation

Before you set out to consolidate all your student loans, gather together the paperwork for all your student loans.  Make sure that you have all the paperwork for each and every loan. You should then use the paperwork to calculate how much you owe for each loan. You should also write out each loan's interest rates, monthly payments, grace periods and pre-payment penalties. If you have private student loans, you will also need to check your credit rating.

When preparing to consolidate your student loans, keep in mind that federal student loans and private student loans must be consolidated separately. 

Step 1: Look up Potential Consolidation Loan Lenders

If you want to consolidate federal student loans, you can either consolidate them through the Department of Education or through private consolidated loan lenders. Consolidating through Department of Education is easier because it already has all your information, but you may be able to find more favorable terms with private lenders. 

Step 2: Choose a Consolidated Loan Lender

To determine which lender is right for you, examine their policies and compare their loan repayment periods, pre-payment penalties and other fees. If you are consolidating private student loans, check their origination fees and their policy towards co-signers. Finally, check to see if their loan's interest rates are fixed or variable. Fixed interest rates increase at a certain set rate while variable rates change at different rates. You should try to strike a balance between low fees and small repayment period. Finally, consider any incentives they might offer and carefully check whether or not they apply to you. 

Step 3: Fill Out the Application

Once you picked a loan, you can apply online. If applying online is not an option you can get the application at any location for free. Be sure to keep your loan information handy as you fill out the application and try to make sure you complete your application before July 1. July 1st is the date when interest rates change. If you are applying for a fixed rate loan, you may be able to get lower rate when you apply quickly.

Step 4: Double-Check the Paperwork

After you apply, the lender will process your application and decide whether or not to approve it. If you are not approved, you can always try to apply with another lender. If you are approved, the lender will send you copies of all the loan-related paperwork. Double-check to make sure all the terms and fees are listed correctly. If there are any mistakes, contact the lender and tell them about it. Just be sure to do it before your first payment - otherwise, getting the application corrected will be harder and will take longer.

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