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Save Money By Consolidating Federal Student Loans |
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Submitted by Martin Martinez
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To get a college degrees nowadays require substantial funding. There are several expenses that have to be paid by potential college students if they are determined to push their way in completing their bachelors from a university or college. Not many have the means to fund their entire college education. And as a solution for this kind of problem, student loans are made available to financially assist a student who has no other means to fund and/or assister their college education.
A student loan is neither a grant nor a scholarship. Loan being the operative word, it has to be paid by the borrower afterwards. Student loans can fall under two types. It can either be federal or private. The difference between the two is that federal loans are guaranteed by the United States government, while private loans are funded by banks or financial companies.
There are many instances wherein students take out more than one student loan to cover their educational budget. This is can be due to unexpected expenses or unforeseen expenditure. Because of this, debt management is particular harder in this case. Having a lot of lenders and loans can be quite overwhelming. If caught is such dilemma, a federal consolidation student loan might do the trick.
A consolidated student loan will combine the federal student loans made into one loan account. Before loan consolidation, the debtor must pay each lender separately. It is important to know how many lenders a student has and how much the debtor owes each of these lenders.
When the payments made by the debtor are added up, the accumulated amount of the repayments made can be substantial. With a consolidated student loan, only one payment has to be made by the debtor monthly. Not only will this make repayments easier, it will also lower the amount of the repayment required monthly. This arrangement results to effective debt management. When consolidating a loan the student has the option of negoiating for a lower interest rate as a result of the consolidation. In addition, consolidating all you loans into a single loan will most likely increase your financial credit score. This can be a real advantage when you are in a new job and seeking to purchase a care or a house.
However, it should be noted that there are also disadvantages in this kind of set-up. Because of the lower repayments made monthly, it will take the debtor a longer time to clear off the loan. If you consider the interest rates applied, the longer the amortization of the repayments, the higher the finance charges will be. Such is the cost of maintaining a good credit rating because of a missed payment.
The federal student consolidation program offers flexible repayment terms to choose from. Before you apply for one, make sure that you understand the terms and conditions of the new loan program that you are about to take. Consider the repayment program, interest rates or even the mode of payment when you are going to apply for such.
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