Why Consolidate Student Loans?

It is very often that students are encountered with the need to avail of loans in order to meet their expenses. Sometimes, the loans might be taken from sources more than one. In the case of multiple loans,
the burden of monthly payment might be huge. And being a student, unless born with a silver spoon in one's mouth, it is natural that the financial backup is not that strong. It is here that the idea of student loan consolidation assumes significance. Not only would your monthly payment be reduced to a substantial level, but also you can save up some amount in the end.
These loan consolidation programmes can extend the tenure of payment to a long period up to thirty years. This is besides the lowering of the monthly instalments that you have to remit in the bank. The process of consolidation of student loans is relatively similar to mortgage refinancing. The consolidation of loans is applicable to most federal loans. Some of the federal loans the names of which deserves mention include FFELP, Perkins, Health Professional Student Loans, FISL, HEAL Guaranteed Student Loans, NSL and Direct Loans.

The weighted average of the rates of interest of the individual loans in the consolidation package when approximated to the nearest one eighth of a percent as well as capped at 8.25 percentages will give the rate of interest of the loan after consolidation. The consolidation process is so structured that the rate of interest will step up only in small amounts. It is however to be noted that the weighted average will not in any case transform the basic cost of the loan. Another point to be noted is that the new rate of interest will be somewhere in between the different rates of interest. Do not fall into the trap of those who claim that the rate of interest will b lower than the present ones. There are no costs involved in the process of
consolidation.