Loan consolidation allows students to combine all of their loans into a single debt, to be paid to one financial institution. The lender will use the funds you pay them to pay off each of the loans you took out during your semesters in school. The process of student loan consolidation or private student loan consolidation is very similar to that of refinancing a mortgage. Those students who have taken out federal direct student loan types are likely to be eligible for consolidation. Those with very good credit may be considered by private institutions for consolidation. It is a good idea to set up an appointment with a financial counselor to discuss your options and work out a payment plan for you.

Students who have just graduated and have yet to find their first job do not have to worry about paying a fee to consolidate their loans because there likely would not be one. That being said, you typically pay more after consolidation because your payments will be extended over a longer period. This means you will have paid more in interest fees by the time you reach your last consolidated payment. This is generally the case because after consolidation, you will be paying a lesser amount each month on a higher amount of total loans, because all the loans have been made into one debt.

If for some reason a potential lender asks you to pay a fee in advance of consolidating your loans, do not do so. There is no reason why you would ever have to pay a fee upfront, and most consolidators do not charge a fee at all. A request for an upfront payment is likely some kind of attempt at scamming you; do not do any dealings with anyone who such a request.

Usually, anyone who has taken out a student loan which includes the parents of a student is eligible for loan consolidation. Unfortunately, loans taken out by two distinct borrowers may not be combined for this type of consolidation. Only the loans taken out by one borrower may be combined into one pool of debt, so to speak. This may seem like a drawback, but these rules are in place to protect borrowers. For example, if a married couple consolidated their debts, only to divorce later, each would remain responsible for the full amount of the consolidated debt. So, neither parents and students nor two married students may combine their debts in consolidation.

You must be finished with school in order to consolidate your debts, and this must be done during the grace period after you have finished school and before you begin paying your loans or after you have begun repaying them. It is a rather simple process to consolidate your loans and often it is a nearly effortless matter of making a phone call and mailing in a signed contract. Any lender may consolidate student loans, which means that competitive rates can be found for those students with excellent credit.

Author Bio: Ellie Lewis recently spent time researching student loan consolidation. Her son is going to apply for a private student loan consolidation.

Category: Finances
Keywords: student loan consolidation,private student loan consolidation