Is It Possible to Terminate A Student Loan Through Debt Consolidation?

| April 4, 2014

Cost of higher education is rising all over the world and not everyone can afford the fees of top level university courses. However, every talented student wants to pursue his dream for a better career. Therefore, they take loans from both government and private organizations to pay the universities. Student loan is really beneficial, but like any other type of debt, you have to repay the borrowed money within certain time limit. So, if you take multiple loans, the total monthly repayable amount can be very high. If you have taken student loans and can’t bear the burden any more, then the best solution for you is loan consolidation.

Student debt consolidation basically means combining several debts into one. It simplifies the refund process and reduces the monthly payment amount. However, there are a lots of things you need to know before opting for loan consolidation. First of all, note that you have to repay every single penny that you have borrowed. No government or private firm can wipe out the amount you have taken for education purpose.

Student loans can be taken from government and also private organizations. However, you must remember that private loans can’t be consolidated like government ones. It is more like refinancing. The two situations are completely different.

One of the biggest reasons for loan consolidation is to make the payment process easier. Once you consolidate, you don’t have to 4-5 different payments. All the amount will be amalgamated into one monthly bill. Suppose you have taken three types of loans for freshman, sophomore and senior years. That is a lot to remember because each one can have its own terms and conditions. If you can’t manage so many different financial obligations, you will find debt consolidation very helpful.

Another major reason for student loan integration is to decrease monthly payment. How is that possible? Let me explain the process to you. When you consolidate student loans, you restart the repayment period. It means you can repay the debt amount over a longer time frame. As a result, you have to pay less every month. Is it a good thing? Initially, it may seem like a great facility, because the monthly amount reduces, but if you think carefully, you will realize that you will pay more than earlier for several years. It is a known fact that the longer you delay to refund, the more interest you have to pay. Still, many students consider it as a great option because the monthly amount immediately goes down.

When it comes to consolidation, the types of loans you have matters a lot. Thankfully, most of the federal loans, including Direct Plus, Perkins, Stafford and Supplemental debts can be united with other student loans. The interest rate of federal consolidation loans is the average of the interest rates of the debts you are unifying. One huge benefit of federal consolidation loans is that the person in debt can have a poor credit score and still qualify.

Now, let’s discuss private student loan consolidation. Private loans can be consolidated with other private loans. Once consolidated, the interest rate can vary. So, the time of application matters a lot. If you consolidate student loans when the interest rate is low, you can save hundreds of dollars. However, the interest rate can fluctuate as the years pass by.

While consolidating federal student debts is easy, private loan consolidation is very difficult. If you are a borrower and want the best rate, you must pass a credit check performed by the lenders. In simpler terms, if your score is not very high, you may pay more after loan consolidation. Besides, if you have just got your graduation degree and have poor credit credit history, then you may need a co-signer to be eligible for student loan consolidation.

So, student debt consolidation is possible, but you need to consider all the factors before taking the

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final step. Take help of a professional while consolidating student loans to stay out of any legal trouble.

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