Education loan consolidation can be tricky business. There are hundreds, if not thousands, of lenders just waiting to offer you a deal on your education loan consolidation. You need to be able to tell the difference between legitimate lenders and companies that are out to make a fast buck on a novice borrower.
A legitimate lender will not rush you into making a decision or try to make you believe that there is any deadline for consolidating your education loans. They will answer any questions you might have and explain their education loan consolidation program in its entirety.
The interest on consolidation loans is based as much on the federal Treasury’s loan standard as your federal student loans. The rate is weighted and rounded up to the nearest eighth of a percentage point. The interest rate is capped at 8.25% which means that you will never have an interest rate that is higher than this, but you can definitely have one that is considerably lower.
Balance vs. Term
You should already be aware of the balance for your total education loan consolidation. The amount of the loan will determine just how long you will be given to repay the full amount. On an extended repayment term, the lengths are as follows:
- Under $7,500 – 10 years
- $7,500 to $10,000 – 12 years
- $10,000 to $20,000 – 15 years
- $20,000 to $40,000 – 20 years
- $40,000 to $60,000 – 25 years
- Over $60,000 – 30 years
- Most education loan consolidation lenders will not consolidate loans with a total balance of under $7,500. The Direct loan program is the most popular one that handles loans with a balance lower than $7,500.
- You can consolidate more than once as long as you have a new loan added to the consolidated loans.
- Once an interest rate is fixed it does not change so you have to stick with it for the full loan term.
- Lenders for federal education loan consolidation usually offer deferment and forbearance options.
- You can consolidate your loans while you are enrolled in a program and delay payments until after you have completed the program.
- Most lenders offer borrower benefit programs that decrease the amount of interest you have to pay for choosing to enroll in a direct debit program or making a certain number of consecutive payments.