Student Loan Consolidation Companies: How to Choose the Right Company for You

Student loan consolidation is a way for graduates to combine all of their student loans into one loan. This loan is handled by a creditor. The creditor pays off the multiple loans in full, leaving the student to pay off a new loan. Students no longer need to pay multiple student loans with separate billing cycles, dates, or interest rates. They now have a loan, and an interest rate, to pay to a creditor.

When considering loan consolidation. You should do the research. Learn about the agreement terms, monthly payments, and interest rates for each loan and creditor first before looking for a loan consolidation company or program. When selecting a company or program, be sure to compare them; Know your contract terms, interest rates and obligations. Once you’ve carefully selected a company or program that you think is right for you, provide them with the information you’ve gathered.

There are federal and private student loan consolidations. Federal Student Loan allows a student to have all of their federal loans combined into one new loan.

The government offers federal programs such as:

o The Federal Family Education Loan (FFEL) Program. FFEL will soon be replaced by the Direct Loan and Pell Grant program and the Federal Direct Student Loan Program (FDLP). These programs allow students to combine their Stafford Loans, Federal Perkins Loans, and PLUS Loans into a single federal loan. These are fixed-rate loans backed by the US government, offered to students and parents.

o The Federal Direct Student Loan Program (FDLP) was created by the US Department of Education in an effort to help parents and students with their loans.

Private loan consolidation combines private student loans into a new loan. Before considering private loan consolidation, apply for a federal loan, the reason for this is to better maximize the federal loans that are available. Private companies like Sallie Mae recommend it.

Here are several federal loans:
o Perkins Loans are funded by the government. They have a very low interest rate, but are based on need; a financial officer would determine if a student is eligible.

o PLUS Loans are for parents of college students. There are also PLUS Loans for students. Payments for this plan will begin once this loan is approved. PLUS loans allow you to take up to 10 years to pay off. Commercial banks and online lenders offer PLUS Loans for both parents and students.

o Stafford Loans offer a low interest rate. They don’t raise your interest rates higher. Stafford loans do not require the student to pay any interest while in school and they are not required to repay the loan within six months of graduation. It offers 10 years for the return.

Here are some private companies that offer loan consolidation:

o Loan Approval Direct offers interest rates as low as 3 percent. Reduce a student’s monthly loan by up to 60 percent.

or SLM Corporation or commonly called Sallie Mae. Sallie Mae offers a variety of options depending on the type of school or educational program a student has. Such programs include the Federal Stafford Loan, Parent PLUS Loan, Graduate PLUS Loan, Sallie Mae Smart Option Student Loan, Continuing Education Loan, and Professional Training Loan.

o Citibank offers programs such as CitiAssist Undergraduate Loans and Graduate Loans, CitiAssist Health Professions; CitiAssist Residency, Relocation and Review Loans; and the CitiAssist Loan Law and CitiAssist Bar Exam. Students receive a 0.25% interest rate reduction on their automatic debit payment program. These programs take 20-25 years to pay off.

o EdFed is another private company. By selecting one of their plans, a student can reduce their monthly payment by up to 60 percent. They also provide interest only payments. Fixed interest at EdFed is the weighted average of interest rates on loans a student consolidated, rounded to the nearest 1/8 percent.