How to Choose the Best Student Loan Consolidation Program?

Student loan consolidation is a specialist field, which is why you should entrust a professional consolidator (i.e., a service agent) to consolidate your student loans. Given the large number of consolidation programs active in the United States, to choose the best student loan consolidation program can sometimes be difficult. (Note: The term ‘student loan’ appearing in the rest of this article refers to federal student loans only).

Student loans in the United States are generally understood to be federal student loans, unless specified as ‘private’ student loans. Federal student loans are student loans whose repayment is guaranteed by the US federal government. The philosophy behind student loans is that monetary problems must not come in the way of education, and that such problems are best left to the time the student enters the job market and starts earning.

Student loan consolidation is the bringing together of all student loans taken by a person into a single loan account with a single monthly repayment at a lower interest rate than applicable on a loan-by-loan basis. Your right of choice: If all the student loans you want to consolidate were taken from the same lender, you have no choice but to first approach the same lender for consolidation of your outstanding student loans. This is the law. However, if your lender refuses to consolidate your loan for any reason, then – and only then – are you allowed to approach a different lender for the consolidation of your student loan.

No competition on interest rates: Let it be clear that lenders are not allowed by law to compete with each other on the basic interest rate front. According to the Federal Family Education Loan Program (FFELP) guidelines, lenders are allowed to calculate your basic interest rate on the basis of the weighted average of the interest rates on your existing loans.

Which student loan consolidation program to choose.

Therefore, there is nothing like one lender offering you a lower basic rate than another. Does this mean you should go in for any student loan consolidation program? No. Consolidators vary in terms of knowledge, rate reduction plans, and the quality of their service.

• Knowledge: Student loan consolidation plans can change with time. A good consolidator therefore is one who is up-to-date with knowledge on the prevailing rules and regulations. For example, there are provisions for loan forgiveness. Do you qualify for forgiveness? You can benefit if you consolidate when still in school or in the six-month grace period immediately following graduation. Has your consolidator informed you about it? These are examples of the importance of knowledge in selecting a student loan consolidator
• Rate reduction plans: Many lenders have some very helpful rate reduction plans. Does you consolidator offer you any information on this? Rate reduction happens in one of the following two situations:

a. Timely payments for several months: If you have a record of on-time payments for several months, you get a rate discount. (The exact number of months will vary from lender to lender – that’s where the consolidator becomes useful by informing you of these different schemes by different lenders).

b. Automated payments from your bank account: If you allow automated payments directly from your bank account towards your monthly repayment of your consolidated student loan, some lenders offer a discount on the basic rate. Some will make the discount applicable after a certain number of installments have been paid, though most will give you a rate after factoring in the discount.

• Service quality: You have a right to efficient and courteous service from your student loan consolidator. As long as you are consolidating federal student loans, your credit history is none of anybody’s business; so you don’t need top answer any questions about it. Your consolidator should show interest in your consolidation case, be polite and, most importantly, be prompt in submitting your application for consolidation. Remember, you have to keep paying separately for each of your student loans until they are formally consolidated, which usually takes up to 60 days. So, a consolidator who is not quick is bad for you.

Student Loan Consolidators :

Student loan consolidators approved by the federal government do not compete on the basic interest rate on your consolidated student loan. However, they do compete on discounts subject to terms and conditions pertaining mainly to your repayment record. It is therefore necessary that you select a consolidator who knows the different rate discount offers of different lenders and offers you the consolidation plan best for you.

There are also other areas of knowledge – such as conditions for loan forgiveness or grace period benefits – with which your consolidator should be thorough. Therefore, you should talk to at least three consolidators, testing them on the lines suggested above, and select the most knowledgeable, hence most useful, to you.