Student Debt Consolidation - A Brief Overview

Student debt consolidation is an easy way out for students and their parents, who are at a loss with documents and repayment dates every month, thanks to the multiple advances taken for education. Many types of advance loans are available for their education. Broadly speaking, student credit is of two types: Federal Loans and Private Loans. If you are not very sure about the system of Federal loan consolidation, let us get a quick overview here.

Federal Loans

Federal loans are those advances that are sanctioned by the U.S. education authorities and eligible students can easily avail these forms of finance. Again, these are of many types. Some of the more popular ones that can be included in student debt consolidation are as follows:

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Federal Perkins Loans Stafford Loans PLUS Loans

Many advantages are associated with the Federal form of credit. The main advantage being that these advances come with the US Government guarantee or reliability. Secondly, this credit is exempted from tax, thereby giving the students the benefit of increased cash in hand. Finally, these advances provide the students the facility of deferred payments, incase they choose to become students again. In the worst-case scenario, if the applicant cannot repay the credit due to unemployment or serious illness, Federal advances "might" be excused.

Private Loans

These are all advances that are not taken from the US Government education authorities. They can be taken from a private bank, a friend or relative.

Points To Remember About Federal Loan Consolidation

Federal and private loans cannot be merged. Try to consolidate the former into one program and all the latter into another. Federal loan consolidation, as the name suggests, is for federal loans only. However, not every federal mortgage taken is eligible for consolidation! Firstly, the borrower must be out of school or college when he is going in for these loans. Secondly, the federal advance repayment, which is to be consolidated, must have started or be in its grace period. Finally, an important point is that the consolidated amount should be above $10,000.


When you decide to consolidate, you are merging multiple advances into one. Therefore, you will have just one advance under your name and no longer do you have to keep a track of multiple due dates and the exact installment amounts. Since you have just one advance to think of, there are less chances of missing installments and your credit ratings going awry. The main essence this program is that the consolidated monthly installment is considerably lesser than that what the students would have paid without consolidating. In some cases, undergraduates can save up to 40%! Look for federal mortgage consolidation programs that do not check the borrower's credit ratings. The scholar or his parents, whoever is responsible for repaying, can stretch the repayment over a period of 30 years! Finally, student debt consolidation is a serious matter; always consult an expert before you choose a company to consolidate your debt and sign on the dotted line.
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