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 lender pays off the multiple loans in full, leaving the student to pay off a new loan. Students no longer need to pay off multiple student loans with separate billing cycles, dates, or interest rates. Now they have a loan and an interest rate, to pay to a creditor.

When considering loan consolidation. You should do the research. Learn the terms of the agreement, monthly payments, and interest rates for each loan and creditor first before searching 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 a good fit for you, provide them with the information you’ve collected.

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 program and the Pell Grant and the Federal Direct Student Loan Program (FDLP). These programs allow students to combine their Stafford Loans, Federal Perkins Loans, and PLUS Loans into one federal loan. These are US government-backed, fixed-rate loans 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 one 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 government funded. 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 repay. Commercial banks and online lenders offer PLUS Loans for both parents and students.

o Stafford Loans offer a low interest rate. They do not raise your interest rates higher. Stafford loans do not require the student to pay any interest while in school and 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 the student has. Such programs include the Federal Stafford Loan, the Parent PLUS Loan, the Graduate PLUS Loan, the Sallie Mae Smart Option Student Loan, the Continuing Education Loan, and the Professional Training Loan.

o Citibank offers programs such as CitiAssist Undergraduate Loans and Graduate Loans, CitiAssist Health Professions; CitiAssist residence, relocation and review loans; and the CitiAssist Law Loans and CitiAssist Bar Exam. Students receive a 0.25% interest rate reduction on their automatic debit payment program. These programs take between 20 and 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. The fixed interest in EdFed is the weighted average of the interest rates of the loans a student consolidated, rounded to the nearest 1/8 percent.