Loan Consolidation Student Loans

How to Write a Mortgage Hardship Letter

2010-05-26T04:29:00.000-07:00

Have you fallen on hard times and now find yourself behind on your mortgage payments? If so, the first order of business is to let your lender know why that happened and how you intend to repay the outstanding debt. Learn how to write a mortgage hardship letter that may help your lender decide to work with you to become current with your payments and avoid losing your home to foreclosure. #
Tips on How To Write a Mortgage Hardship Letter

1. Don't delay in communicating your situation to your mortgage lender
2. Have a good understanding of your finances by developing a budget before beginning your letter
3. Determine if you would rather sell or keep your home, and convey that to the lender
4. Write a letter that is organized and informative about your situation
5. Thank the lender for his or her time

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Disclaimer
The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.

Introduction

* A financial hardship letter is an appeal by homeowners to their mortgage lenders that explains their inability to keep their home loan payments current, and to request that the lender work with them to devise a plan to prevent a foreclosure on their homes. Lenders are intent on receiving a return on their investment and do not want a loan default on their record. For this reason, many are willing to work with homeowners if they are convinced that the homeowner has the means to repay them, and will be able to bring the mortgage payments up to date.
* Many banks are receiving government incentives to help distressed homeowners stay in their homes, which has led in many cases to their putting foreclosures on hold. Negotiation and communication with your mortgage holder is essential—it may very well keep you from losing your home and help you to get back on your financial feet.
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Step 1: Assess Your Financial Health
(Creative Commons photo by Roque Sun Media)

* Determining your financial health is crucial to understanding what steps are necessary to save your mortgage from default. Begin the process by honestly answering the following questions:

1. What caused your inability to repay the loan?
1. An illness?
2. Job loss?
3. A death in the family?
4. A change in your mortgage repayment terms?
5. Did you purchase more home than you could afford?
2. Is the issue a short- or long-term problem?
3. How much equity is in your home?
4. Do you know your FICO credit score? The results will determine if refinancing or a lower payment is available to you.MyFICO.com: MyFICO1

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Step 2: Create a Budget
(Creative Commons photo by Jamin Gray)

* Determine what payments you can afford by creating a budget.

1. Write down your full monthly income, be it from a paycheck, investments, or support payments.
2. Take a look at your credit card statements, your checking account ledger, and bills to determine what payments are due each month.
3. Take special note of how much your mortgage payment is, and what percentage of your income it accounts for.
4. Record these monthly debts and subtract them from your monthly income.
5. Assess if there are any monthly debts you can get rid of, like a premium cable bill or membership in a country club.

* If, after calculating your budget and cutting costs, you are not able to meet your monthly mortgage payment, you will have a negative balance.
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Step 3: Determine Your Objectives

* After you have determined your financial situation and understand what you are consistently able to repay on a monthly mortgage, decide what your goal will be when you approach your mortgage lender.

1. Do you want to save your home from foreclosure? (Additional information can be found on Mahalo's How to Stop Foreclosure, How to Refinance a Mortgage to Prevent Foreclosure, How to Avoid Foreclosure with a Mortgage Modification and How to Avoid Foreclosure on a Fannie Mae Mortgage pages.)
1. If you have good credit and a hefty amount of equity in your home, you may want to ask the lender to allow you to refinance your home, which would lower your existing payments. (Additional information can be found on Mahalo's How to Refinance a Mortgage page.)
2. Consult your budget to determine if this is financially possible; if not, is it possible to take on additional employment to make up the deficit?
3. Be brutally honest with yourself—is it a feasible reality or a dream?
2. Would you prefer to sell your home?
3. Are you trying to stay in the home for a few months while you look for a new place to live?
4. Do you want to change the terms of your mortgage by removing a balloon payment or a variable interest rate? (See additional information on Mahalo's How to Modify Your Mortgage page.)
5. Are you hoping that your mortgage company will allow you a forbearance agreement? (This is an agreement that they will not foreclose on your home and will help you devise a plan to get your payments current.)Investopedia: Mortgage Forbearance Agreement3
6. Do you want to file a chapter 13 bankruptcy plan to repay your debts over a fixed period of time? This agreement does not allow a creditor to begin or continue collection proceedings against you and will not allow a mortgage holder to foreclose on your home.US Courts.gov: Chapter 134
7. Do you want the option of a short sale of your home? (This is a sale that occurs when a lender accepts less money than you owe to them.)Realtor.org: Field Guide to Short Sales (March 2009)5

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Step 4: Write the Letter
(Creative Commons photo by a.drian)

* Once you have determined what your intentions are regarding your home, and what exactly you're planning to request of your mortgage lender, you can begin to formulate what you will write in the hardship letter itself.

Your letter should include the following information:

1. Essential introductory info:
1. Names of the borrowers
2. Address of the property
3. Date of the letter
4. Your phone number
5. The mortgage loan number
2. The reason for your letter (i.e. you are currently unable to make your payments).
3. The circumstance that caused you to be unable to keep your mortgage payment current (i.e. a death, illness, job loss, etc.).
4. How that circumstance has affected your income (i.e. it has cut your income, delayed your income, etc.).
5. Your belief as to whether the situation is permanent or temporary.
6. The goal of the letter (to keep your home and work out a repayment plan, to sell the home, etc.).
7. What you intend to do to resolve your financial indebtedness.USALS: How to Write a Hardship Letter6
8. The amount you are reasonably able to afford on a monthly basis.
9. A thank you for taking the time to review your letter.
10. Information about your enclosures and why you have included them. Enclosures should include:
1. Your average monthly income (pay stubs).
2. Evidence that you have had financial hardship (unpaid collection notices for bills and current bank statement).
3. The budget you have created that shows your monthly expenses.
11. Information that is specific to your request:
1. Short sale: Explain that you would like to have time to list the home for sale, avoid foreclosure and help them retain as much money as possible in the process.
2. Loan modification: Let the lender know that you have rectified or improved on the circumstances that caused the initial payment problems, such as through a new job or a second income. Provide them with a repayment plan and let them know how hard you intend to work to stay in your home.

* When writing your mortgage hardship letter, do not:

1. Explain or divulge everything that led up to the default.Calculated Risk: How Not to Write... (May 22, 2008)7
2. Try to make the mortgage holder feel sorry for you—it may backfire.
3. Present yourself as unable to repay the loan.
4. Give a vague or rambling description of what you intend to accomplish with the letter.
5. Place blame on the mortgage holder.
6. Present untruthful information.

* Stick to the facts and keep the letter simple and to the point. Do not elaborate on the details or make excuses for your inability to pay on time. The mortgage lenders have seen many of these letters and are unmoved by long drawn-out stories. Be practical and express your needs clearly. The mortgage company is merely interested in your intentions and how you expect to remedy your payment deficit.Active Rain: Writing a Hardship Letter...8

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Conclusion

* Be encouraged to know that missing a mortgage payment is not immediate cause for losing your home. Be upfront with the mortgage lender about your financial situation and your need for his help. You may be pleasantly surprised at how willing he is to help you get back on track and save your home from foreclosure.

purchase structured settlements

2010-05-26T04:22:00.001-07:00

What are Structured Settlements?

When law suits are settled, damages may be awarded in a lump sum, or a series of payments. A settlement which is awarded in a series of payments over time is called a structured settlement. Structured settlements are generally created by using a third party intermediary to provide the financing.

How to Purchase Structured Settlements
Are you looking to invest cash in structured settlements? (Photo by Christy Thompson)

* State and federal law may restrict the sale of structured settlements, and there are many legal complications that can arise. Since you'll be exchanging cash for the right to receive future payments, you'll want to make sure that you are protected.

1. Work with an established broker.
2. Look for a structured settlement financing company who is a member of the National Structured Settlements Trade Association who also places settlements with private investors.
3. Get multiple quotes to ensure you get the best deal.
4. Retain an attorney to review the agreement to ensure your interests are protected.

Loan Calculator

2009-05-09T01:56:00.000-07:00

In this loan calculator you can enter the information about your loan. You will see the result of your loan. It has everything which you need in loan calculator.

Simple Loan Calculator

2009-05-09T01:12:00.000-07:00

Simple loan calculator for loan. It has loan information. It is simple form. It has 5 boxes for loan information. Loan amount, interest rate, years, monthly payment. You will fill the form then you can get result for loan information.

Loan Calculator

Facts on consolidation of student loans

2009-05-06T21:42:00.000-07:00

Chances are if you take on student loans to finance your studies you have been, or at least will receive calls and offers by mail to consolidate your student loans. There are indeed many advantages to consolidate your student loans. In addition to gaining a fixed interest rate, you can also potentially reduce your monthly payments. In case you start to experience financial difficulties, you May also be able to take advantage of flexible payment options with a student loan. Unlike other types of debt consolidation student loan consolidation gives you the opportunity to combine your loans into one package more attractive. You can also do not have to worry about being rejected because of a bad credit rating and interest on the loan May be tax deductible. In addition, in the event of your death your survivors will not have to worry about paying back because the debt will be discharged.

If you have a variable interest rate on student loans, consolidation loan can also help block a lower rate before the rate hike next year. Over the duration of the loan, this step can actually help you save a huge sum of money. Of course, in addition to the benefits there are also disadvantages that you should be aware. One of the most important things is that if you end up lowering your monthly payment you are actually extending the duration of the loan and that means you pay more over the term of the loan by additional d 'interest. You can still enjoy other benefits of consolidation loans for students without this drawback, however. It just does not reduce your payments unless it is really necessary. In reviewing the donors for a student loan consolidation, it is important to always compare the conditions of each offer made for you. Consider the interest rate and length of repayment terms to ensure you get the best deal possible. If you have a mixture of both federal and private student loans, you should also note that if both types of loans are available to be consolidated May it not be a good idea to consolidate your federal loans and private loans in the same package. There are provisions on private loans that are not required on federal student loans, for example, deferrals, tax deductions on interest, no forgiveness of debt for death and no forgiveness for the loan work in some areas. In the case of a mixture of private and federal governments, it is generally advisable to go ahead and consolidate private loans separately by the Confederation of loans so that you can retain benefits for federal loans . By understanding all factors related to the consolidation of student loans, you'll be in a better position to take a more informed decision regarding your finances.

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The Best Student Loan Consolidation Rate for You

2009-05-05T01:02:00.000-07:00

So how do you acquire a consolidation loan with the best rate? There are several types of loans that you should consider. For example you can apply for a loan with the consolidation fixed loan rate student rate. Fixed rate means that you will be paying the same interest rate until you pay off the loan. If the economic indicators change, you still have the same consolidation interest loan rate. Your rate will not depend on inflation.

There will, however, be conditions when the bank will be allowed to change your fixed rate. Lets say, if you default on one or more of your payments, this can cause the student loan consolidation rate to increase. You can also apply for a loan with the variable (or adjustable) student loan consolidation rate. This means that your consolidation loan low rate student rate will change depending on the current economic conditions. If average interest rates in the economy increase, so will your rate. On the other hand, if the average rates are going down, your rates will decrease too. It is up to you to decide which rate – variable or fixed – will provide you with the consolidation loan lowest rate student interest rate. Different economic conditions will call for different selections. It is important to understand that whether you are applying for the consolidation student loan, quick settlement loan online or other type of loan, you should always focus on reducing the student loan consolidation rate or some other type of interest rate.

Government Student Loan Consolidation

2009-05-01T11:49:00.000-07:00

A government student loan consolidation is a fixed-rate loan that combines multiple student financial credits. For graduates with multiple credits, the opportunity to consolidate to one payment offers the recent graduate a blessing. Upon spending a number of years being educated, the recent graduate begins searching for a job that he or she has been preparing to obtain. Finding a good paying job can often take a little time. Even though the graduate has a 6-month grace period before payments on the debt need to begin, money is usually tight. The government student loan consolidation, along with the 6-month grace period, offers a recent graduate an opportunity to breathe easier and find stress relief.

In order to qualify for a government student loan consolidation the consolidator needs to meet a few eligibility requirements. The first prerequisite requires a potential consolidator to have more than one government student loan, also referred to as a federal student loan. The borrower must also be in good favor with the lenders. At least three payments should have been made, or the borrower should still be within the first 6-months grace period. Consolidation can occur with various options like subsidized and unsubsidized.

While the two types can be combined and allow the borrower to have one payment, the lender will keep the two types separated for better management purposes. After the combination of all financial credits for the borrower, the lender is responsible for making payments for each advance. Thus, consolidation occurs. The government student loan consolidation may also incorporate private financial advances into the consolidation, but many financial advisors warn against such incorporation. When private and individual lender amounts incorporate with federal loans, the combination will cause the benefits originally associated with the private and individual lends to vanish. Some feel that the combination is worth the risk and the combination offers better benefits than originally associated with the financial advances. About four options are available for borrowers to choose from concerning repayment. The options surrounding the government student loan consolidation have a number of advantages and disadvantages. The advantages range from no fees for the consolidating process to the simplicity of the application process. Since borrowers are already paying a premium dollar amount for an education, the government offers students a break by not charging a fee for the application process and by offering lower interest rates. In view of the fact that most processes offer a stretched out payment period for up to 30 years, the smaller monthly payment offers recent graduates a sort of payment debt relief. The stretched out loan period and low interest rates can save a payee up to 53% in each month's payment. The government student loan consolidation offers low locked-in-rates, which presents additional savings to a student since interest rates tend to fluctuate and rise. As with most debt settlements found after college, government options provide a graduate with other benefits that include deferment of payment, if unforeseen problems arise, and forbearance options associated with deferments. Disadvantages appear with a fusion of debt as well. Sometimes combining debt can lead to larger financial obligations. A consolidation may also lead to higher interest rates. A borrower must be aware of the amount of his or her financial obligations. Higher interest rates can happen depending on the types and dollar amounts involved and may vary depending on what previous rates were. The government student loan consolidation gives a borrower lower monthly payments because the payments extend over a long period. Because of the stretch in time, more interest is paid. When payments are made as scheduled, more money is paid, in the end, than originally borrowed. However, if a borrower has already made payments and has paid a large portion of the bill, a fusion of the financial debts may not be advantageous. Many consolidators now also require a certain dollar amount before a merging of financial debts is considered. So, if a student has several loans but the total amount is small, an application is sometimes rejected. In today's society, more people are aware of and try to establish a good credit report. As a result, a graduate may make a wise decision in consolidation. No credit check transpires in applying for a federal consolidation program. In using government student loan consolidation, the graduate is helping his or her credit rating! Most graduates have up to eight different financial advances or more. Each financial lend is considered a debt and is looked at with negativity. When debt fusion occurs, the multiple debts look paid and only one outstanding bill remains. In the eyes of other creditors and even potential employers, the fewer debts a person has, the better. A larger benefit associated with credit checks and scores rests in early payoff methods. If a borrower can pay off the balance ahead of schedule, no penalty is placed on the person. An early payoff is a huge incentive for applying for federal consolidation. A person can have lower payments on their college bill upon graduation and have the opportunity to make larger payments or an early pay off when money is sometimes more plentiful. However, if an early payoff is desired, a person must plan and budget accordingly. Even making an extra payment or paying an extra portion each month can decrease a loan more quickly. "When thou shalt vow a vow unto the Lord thy God, thou shalt not slack to pay it: for the Lord thy God will surely require it of thee..." (Deuteronomy 23:21).

(Gifted learners) Is Student Loan Consolidation on Private Loans Really An Option?

2009-05-01T11:39:00.000-07:00

Private student loans are credit-based and have more attractive repayment terms as well as interest rates. It can really help in saving money every month unlike the Federal student loans. Private student loan consolidation is simply the process of refinancing and combining private student loans into a single debt only. It may result to a lower monthly loan payments thus will also lessen your worries about your multiple loans.

The very main essence of a private student loan consolidation is to lessen the monthly payment of students who have multiple loans. By getting quotes from various lenders, a student can have knowledge about how to get the best deal with all the prevailing market rates present nowadays. Furthermore, private student loan consolidation can result to an extended loan payment. This gives the student borrowers enough time to pay their loans with fewer burdens. These beneficial advantages offered by the private student loan consolidation are not possible if students have several loans to handle. There are various private student loan consolidation companies which offer more benefits. One of these is the interest rate reduction which can result to lower loan monthly payments to think of. The options for the loan repayment procedures depend upon the qualifications being required by a particular lending company. Thus, it is also the work of the lending company to choose the best private student loan consolidation program suitable for a particular student loaner. Indeed, private student loan consolidation brings various benefits. However, one should still be aware of some situations like the drawbacks of having a private student loan consolidated. Student loans are indeed a very big help for students who are deeply in need of some financial aids. However , all students who have decided to avail of a particular student loan should bear in mind the responsibility in repaying the borrowed amount of money. In fact, there are so many ways on how to pay off student loans. The very first thing to do is to develop a plan on how to pay off student loans. Second is to look for a summer jobs or internships to be able to save a lot of money and not waste your valuable time. Part-time jobs will also do to help pay a loan. Also, take into consideration to consolidate current student loans to have lower interest rates. Furthermore, one should perform volunteer works like teaching, medical works or even military works to reduce at least somehow a debt. It would also be good to apply for some grants and scholarships while in school to lessen the burden. And lastly, take good care of the credits. Late payments should be avoided to have a good credit score. It is important to pay off private student loans as quickly as possible. Sometimes, early paying off of the loan will lessen the burden along with a particular student loan. To make paying off easy, one can start paying off first the non-subsidized loans for it has an obligatory interest. Also, if one has several loans already, paying off first the smallest loan would be much better. Just always remember to always do the best in paying off student loans. Be a responsible student loaner! Failing to pay off student loans can stick with you for decades. You can’t go bankrupt on student loans so don’t count on that as saving you down the road!

The Advantages Of Student Loan Consolidation

2009-04-25T03:38:00.000-07:00

In order to make simple the payment of federal student loans, it is highly advisable that you consider consolidating your loans - this is done by combining all the different types of loans you incurred. Doing so has many advantages. One is that federal student loan interest rates are currently at their lowest, so consolidating your loan means that the interest rate used for the whole duration of your loan is fixed. One category you could take into consideration regarding federal student loans is availing of the FFEL student consolidation loan.

This loan program helps any borrower especially students via multiple repayment schedules. Thanks to the FFEL student loan consolidation program, only one payment is made each month. Through the FFEL program, the loan consolidation you will be acquiring will be made by a commercial lender, after which credit bureaus will tell you that you already have a zero balance in your account, after doing so you will then sign a fresh promissory note indicating that you will have a new interest rate and schedule of repayment. However, in order to avail of the FFEL consolidation loan, you must currently be in repayment on the loan you defaulted or that you have been able to make at least three voluntary and on time monthly payments in full. Disadvantages of availing student loan consolidations, if there are any, actually depends on you. If in case it would take you a bit of a longer time in paying off your student loan, you will then consequently pay more interest during the course of your whole loan repayment. However, since in consolidating your loans, there are really no penalties in prepayment and if you continually pay the same amount payments before actually consolidating your loans, the interest you will incur would not increase thus you will be able to pay the loan faster than when you did not consolidate your loans. Another advantage when one avails of student loan consolidation is that there are no fees or charges incurred. The United States Department of Education does not in any way make charges or collects any fees to any borrower who avails of the student loan consolidation. Refinancing student loans again depends on the borrower. The United States Department of Education does not in any way allow any borrower to refinance a student loan consolidation. But if in case a borrower has an additional federal loan that is not originally included in the loan consolidation, these debts may then be added and calculated again into a another Federal Consolidation Loan. Student loan consolidation has another advantage. A borrower is still entitled to avail of the same Federal benefits. This is because student loan consolidation is a federal program. And being it a federal program, a borrower is more than welcome and is entitled to various benefits such as deferment, interest that is tax deductible and forbearance. Plus, the loan is guaranteed by the government and is insured federally. The following is a basic list of 8 student loans that are eligible to be consolidated. 1. SS - Subsidized Federal Stafford Loans & Guaranteed Student Loans (GSL) 2. DSS - Direct Subsidized Stafford Loans 3. DUS - Direct Unsubsidized Stafford Loans 4. DPLUS - Direct PLUS Loans 5. DUCON - Direct Unsubsidized Consolidation Loan, including Direct PLUS Consolidation Loans 6. US - Unsubsidized and Non-subsidized Federal Stafford Loans 7. NSL - Federal Nursing Loans 8. HEAL - Health Education Assistance Loans

Guide For Student Loan Consolidation Advice

2009-04-25T03:16:00.000-07:00

Students, who cannot afford their monthly payments, can now make their debt repayments more manageable through student loan consolidation. Banks and several financial organizations are offering attractive packages to students who are willing to get their loans consolidated. Mentioned below are some important points that need to be remembered while opting for a student loan consolidation. 1. Calculation of interest rates on student loans occurs in accordance with the 91-day Treasury Bill auction. Thus, determined interest rates are applicable from July 1 through June 30 of each year. It is always better to wait until July 1 to determine whether or not to consolidate the student loan as interest rates can increase or decrease. 2. Lenders often take more than a month time to approve a loan application. If the approval date goes beyond July 1, one needs to make monthly payments according to the restructured interest rates that might either increase or decrease. Hence, it is always important to plan properly before filing an application. 3. Consolidating a student loan as a married couple can be advantageous because one can obtain a higher amount as a loan.

However, both the husband and wife are responsible for repayment of the loan, even if they get divorced in the future. 4. Student loan consolidation does not require the lender to make any credit checks. Interest rates are also not dependant on the credit record of the customer. 5. It is important to shop around and compare offers from different lenders so as to avail the best deal. One good way is to contact any reputed online lenders since online lenders quote a lower interest rate in comparison to brick and mortar lenders. Some lenders even offer certain attractive offers such as reducing the interest rate by 0.25 percent if the monthly payments are made electronically or a 0.5 percent reduction after a few years of continuous and timely payments. It is worthwhile to check such offers. About Author: Pauline Go is an online leading expert in finance industry. She also offers top quality financial tips like:

Student Loan Consolidation and Bad Credit

2009-04-25T02:55:00.000-07:00

People with multiple student loans from college often want to consolidate, but they fear it would hurt their credit rating. Most people are very unsure about the relationship between student loan consolidation and bad credit. Whether or not consolidation is a smart financial move for you really depends on your situation. Because of the complex web of possibly repayment plans and the formula that determines federal consolidation loans' interest rates, there is no one-size-fits all answer. Sometimes it saves you money and sometimes it doesn’t. Even if it doesn't, paying more in order to secure a lower monthly payment makes sense for some people and not for others. It's a highly personal decision. If you do decide that consolidation is a step you want to take, you might be worried about its impact on your credit. Will consolidation put a black mark on your credit report? And if so, how big will it be? Well, rest assured, because consolidating your student loans will not hurt your credit. Credit bureaus classify debt in two ways: good debt and bad debt.

Credit card debt, for example, is bad debt. It will lead to nowhere but more debt. Student loan debt, on the other hand, is good debt. You are borrowing money so that you can get a better job and make more money in the future. You are going in to debt only to better yourself. What's more, consolidation might even increase your credit score. Let's say you have eight student loans. That lists as eight separate creditors on your credit report, and eight separate accounts for which you are all in the hole. But when you consolidate them, it rolls them up into a single loan. Now your credit report reads that you have just one creditor, and your credit has accordingly gone up. Also, having a lower monthly payment to make also lowers your score. Credit bureaus weigh your current income against the amount of payments you need to make monthly. If you are paying off several student loans and it adds up to a substantial chunk of your income, your credit will be lower. But getting a lower monthly payment and freeing up some of your income can raise your credit as well. When determining your credit score, bureaus also look at the open lines of credit you have that are currently being used, as opposed to ones that aren't. If you have eight loans and are paying on all of them, they are all considered open lines of credit that are being used. But if you have just one consolidation loan, your credit report only lists one line of credit that is being used. One line of credit versus eight can mean a significantly higher score. So there is no need to be concerned that there is a relationship between student loan consolidation and bad credit. On the contrary, it actually causes your credit rating to improve most of the time. So if you think consolidation might be the best thing for you, go for it. Your wallet (and your credit rating) will thank you. About the Author Student consolidation loan and bad credit do not seem that your financial outlook for reducing payments would be very high but it is possible. For more on this and how you can find consolidating your student loans can save you a ton of money, then visit Student Consolidation Loan 101.

Government Student Loan Consolidation

2009-04-25T02:47:00.000-07:00

It is often said that education is the best investment that one can make in one’s life. Although there are various student loan options but repaying them can be a tough task. However, government student loan consolidation is a reasonable option as compared to private loan offers. Many people are reluctant to take student loans because of the high interest payment. Government Student Loan Consolidation Eligibility Government Student Loan Consolidation can be applied by any student that have taken federal loans.

Some of the requirements that must be considered are that the student should have taken more than one federal student loan. Also, a student should have a good credit rating or should be in the grace period of a post graduation course. To make payment easier for students, both unsubsidized and subsidized student loans can be consolidated. This enables a student to pay only one payment per month. Government Student Loan Consolidation Benefits Government Student Loan Consolidation allows students to pay loans over a longer period of time as compared to private student consolidation loans. As a result students are required to pay only a small amount per month. The interest rate, total loan amount and repayment duration determine the monthly payment cost. Maximum repayment duration can extend up to 30 years. It is advisable that a student should try to pay quickly as the interest rate along with the principal sum adds up to be a significant amount over time. Some of the benefits of government student loan consolidation include low payments, low interest rate and easy payment method. With the loan, a student is not required to pay any of his previous loans and instead is required to pay only a single monthly installment. Moreover, the interest rate currently is at the lowest levels, and thus it is the best time to take student consolidation loans.

Student loan consolidation

2009-04-25T02:33:00.000-07:00

In the

United States

, there are many college students or students ready to go to college who do not have enough money to payoff higher education. The government offers the Federal Family Education Loan Program as well as the Federal Direct Student Loan Programs to help students and families with the costs associated with college. These programs include consolidation loans that let the student consolidate certain types of loans into a single debt. The loans that can be consolidated through these programs are the Stafford Loans, PLUS Loans, and Federal Perkins Loans.

The reason that loan consolidation is important is because it reduces the monthly payments for the student and makes the term for the loan longer. The great things about loan consolidations is that the loans have a fixed interest rate for the life of the loan.. For consolidation loans, the loans usually has a longer term that most other loans. The debtor can choose anywhere from ten to thirty years. The monthly payments are lower than it would have been had the student not consolidated the loan, but the total amount that is paid over the term of the loan is higher than it would have been with another type of loan. The fixed interest is calculated with a weighted average and the features for most original student loans such as a post-graduation grace period and special circumstance forgiveness are not carried over. For these reasons, a student consolidation loan might not be suitable for every debtor. Some may have an easier time sticking with the original loan agreement.. Student loan consolidation often allows the student to keep better track of their student loans. When leaving college, students often carry loans from various different sources resulting in multiple monthly bills. A student loan consolidation can take all smaller loans and combine them into one total loan with one loan payment.

Loan Consolidation Student Loans

2009-04-24T10:09:00.000-07:00

Loan Consolidation Student Loans combine several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. It is very similar to refinancing a mortgage. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Loan Consolidation Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well. A separate page provides a comparison chart of consolidation loan discounts. Interest Rates the interest rate on a Loan Consolidation Student Loans is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%. For example, suppose a Loan Consolidation Student Loans has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly. If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example,

if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 6.8%), the weighted average is $5,000 * 5.0% + $10,000 * 6.8% ------------------------------ = 6.2% $5,000 + $10,000 This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%. Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%. If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between.

Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same. (For the mathematically inclined, there is a slight difference due to the different shapes of amortization curves at each interest rate. In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. So using a weighted average yields a very small reduction in the monthly payment (in this case, 7 cents) and in the total interest paid ($8.68) due to a kind of triangle law. Of course, when you consolidate the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, yielding a slight increase. So you pay a tiny bit of a premium for consolidation, due to the rounding up of the interest rate. The PLUS loan interest rate loophole can reduce the interest rate on 8.5% fixed rate PLUS loans by 0.25% through consolidation. If you were deferring the interest on an unsubsidized Stafford Loan by capitalizing it, most lenders will add the capitalized interest to principal when you consolidate. (Lenders can capitalize interest at most quarterly, but most capitalize it once when the loans enter repayment or at other loan status changes.) No Cost to Consolidate Aside from a slight increase in the interest rate on the consolidation loan, there is no cost to consolidate your loans. There are no fees to consolidate. Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check.

There is never an up front fee. If someone wants you to pay an up front fee, chances are that it is an example of an advance fee loan scam. Who Can Consolidate Both Loan Consolidation Student Loans and parent borrowers can consolidate their education loans. (Loan Consolidation Students Loans and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.) Married students are no longer able to consolidate their loans together. This provision was repealed effective July 1, 2006. When married students consolidated their loans together, each spouse became responsible for the full amount of the loan, and the loans could not be separated if the couple got divorced. To avoid such problems in the future, Congress decided to repeal this provision as part of the Higher Education Reconciliation Act of 2005. Students can only consolidate their education loans during the grace period or after the loans enter repayment. (Loans that are in default but with satisfactory repayment arrangements may also be consolidated.) Students can no longer consolidate while they are still in school. (The early repayment status loophole and the ability of Direct Loan borrowers to consolidate during the in-school period was repealed as part of the Higher Education Reconciliation Act of 2005, effective July 1, 2006.) Parents, however, can consolidate PLUS loans at any time. You Can Consolidate with Any Lender Students and parents can consolidate their loans with any lender, even if all of their loans are with a single lender. (The single holder rule was repealed on June 15, 2006, as part of the Emergency Supplemental Appropriations Act of 2006. Borrowers no longer need to exploit the single holder rule loopholes in order to consolidate with any lender.) Direct Loans can also be consolidated with any lender. This allows you to shop around for a lender that offers a lower rate or better discounts. Most lenders require a minimum balance before they will consolidate your loans. For example, many lenders will only offer consolidation loans for borrowers with loan balances of at least $7,500. A few lenders will offer consolidation loans for balances of $5,000 or more, and the Federal Direct Consolidation Loan program has no minimum balance for consolidation loans. (Lenders may not discriminate against borrowers who seek consolidation loans on the basis of number/type of loan consolidation student loans, type/category of educational institution, the interest rate on the loans, or the type of repayment schedule sought by the borrower.

Lenders are, however, able to discriminate on the basis of the amount of the loans being consolidated, so lenders can set a minimum balance on the loans.) Which Loans Can be Consolidated? Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan. You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself. These restrictions have been in effect since early 2006. Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan. Consolidation does not pierce the veil on previous consolidations. The new restrictions on consolidating a consolidation loan limit your ability to use consolidation to switch lenders. Generally, you will consolidate your loans once, toward the end of the grace period or after the loans enter repayment, and then be locked into that lender for the lifetime of the loan. If you want to preserve your ability to use consolidation in the future to switch lenders, you should exclude one of your loans from the consolidation. Repayment Plans Consolidation loans provide access to several alternate repayment plans besides standard ten-year repayment. These include extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only). If you do not specify the repayment terms, you will receive standard ten-year repayment. Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased. In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years.

The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease. You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan. See our caveat about extended repayment below. Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for an deferment or forbearance. Federal education loans, including consolidation loans, do not have a prepayment penalty. So you can pay off all or part of your federal education loans without incurring a penalty. If you want to take advantage of this, be sure to include a letter with the extra payment indicating that it should be applied to reducing your principal. Otherwise, the lender may treat it as an advance payment of the next month's monthly payment. Tools for Evaluating Consolidation Options FinAid's Loan Consolidation Calculator can help you understand the tradeoffs of consolidating your loans. It compares the reduction in the monthly loan payment with the increase in the total interest paid over the lifetime of the loan. It also shows you the interest rate on your consolidation loan. Despite the switch to fixed interest rates on Stafford and PLUS loans eliminating a key financial incentive to consolidate, there are still several reasons to consolidate your education loans. These include having a single monthly payment, access to alternate repayment plans, the PLUS loan interest rate loophole, and the ability to reset the 3-year clock on deferments and forbearances. But consolidation can cut short the grace period, although the grace period loophole can work around this problem. It is best to avoid consolidating Perkins loans, because you lose several valuable benefits. Beware of extending the term of your loan, as this can increase the total interest paid over the lifetime of the loan; you can stick with standard ten-year repayment. Before consolidating, always evaluate the benefits provided by the current holder of your loans. The loan discounts offered by originating lenders tend to be superior to those offered by consolidating lenders, since consolidation loans have tighter margins. Also, if you received a fee waiver or rebate from the originating lender, you may have to repay that discount. if you consolidate with another lender. It may be possible to get some of the benefits of alternate repayment plans without consolidating, such as extended/graduated repayment with a loan term of up to 25 years and a single monthly payment, if you have more than $30,000 in federal education loan debt accumulated since October 7, 1998 with the lender. (This is due to a little known provision of the Higher Education Act, in section 428(b)(9)(A)(iv), and the regulations at 34 CFR 682.209(a)(6)(ix).) You can change the repayment schedule on your loan once per year. So consider starting off with standard ten-year repayment on your consolidation loan. You are not required to start off with extended repayment. If you find it difficult to afford the payments, you can always switch to extended repayment later.

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