Rules For Consolidating Private College Loan Debt
Michalis 'BIG Mike' Kotzakolios
A private college loan does not have to take up all of your disposable income. Consolidating your private college loan can ease the burden of high monthly payments and interest rates. Consolidation can also ease the burdens on your time. Private college loan consolidation takes all your student loan debt and combines it into one monthly payment. Management of the debt becomes easier. If you choose to consolidate private college loans, there are some rules to be aware of.
If your private college loan is a government loan, you can get a lower interest rate by consolidating while you are still in school or during your repayment grace period. You have four options for repayment with a direct consolidation loan. A standard repayment plan gives you fixed monthly payment for no more than 10 years. An extended repayment plan also gives a fixed monthly payment. The payment amount is also lower than the standard repayment plan because the term of the private college loan consolidation is anywhere from 12 to 30 years. The term depends on how much is actually borrowed. A graduated repayment plan has a fixed monthly payment for the first two years. Then, the monthly payments increase every two years, hopefully in step with the borrower’s increasing income. The term of a graduated repayment plan can be from 12 to 30 years. The Income Contingent Repayment Plan has a monthly payment that takes into account the borrower’s adjusted gross income, family size, and the amount of private college loan debt. The term can be up to 25 years. You can switch repayment plans any time.
If you qualify for a consolidation while you’re enrolled in school you can get a grace period of 6 months before you actually have to begin repayment on the loan. In addition to the standard grace period, a direct consolidation loan offers other deferment options. A direct consolidation loan is not exclusive based on the amount of the loan debt to be consolidated. Additionally, there are no fees associated with getting a direct consolidation loan. If you’re asked by a lender to pay an application or credit check fee, find another lender.
If you have a subsidized Stafford loan, the federal government pays your student loan interest while you’re in school or during the grace period. When you consolidate your loans, the subsidy benefit does not go away.
If you have Perkins loans that you’d like to consolidate into a direct consolidation loan, you are allowed to only if you also include at least one Federal Family Education Loan or one Direct Loan. You can’t get a direct consolidation loan for Perkins loans by themselves.
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