A federal student loan consolidation is a fixed rate refinancing program that combine all your existing federal student loan into one new loan. Federal student loan consolidation helps to give a student who has just graduated more time to pay back the loan. You will also save the frustration of dealing with multiple lenders and reduce the risk of missing payment because loan consolidation combines all your loans to a single loan meaning that you will have one single bill to pay. Below are benefits of student loan consolidation.
1. Fixed interest
Many non-consolidated student loans usually operate on a variable interest rates meaning that you can pay more or less depending on prevailing interest rates. Federal student loan consolidation has fixed interest rates meaning that you can make predictable payment plans. You will also know how much you are supposed to pay. You will benefit if interest rates go up because yours won’t change.
2. Long repayment periods
Another benefit of consolidating your student loan is that you get more time you pay back the loan. You will be given up to 30 years to pay back the loan meaning that you will not be pressured as it is usually the case with other types of loans. You will also have the freedom to pay off the loan early with no penalties for early payments.
3. You only deal with one lender
Loan consolidation allows you to only deal with a single leader. Many students take several types of loans to pay for their college fee. When you graduate with a loan from the federal government as well as few other private lenders, it might be a bit challenging to keep track of all your loans. Loan consolidation allows you to only deal with one lender. This will make the repayment process easier.
4. Low interest rates
Unlike other types of loan, consolidated loans usually have low interest meaning that you will pay less. The main reason consolidated loans attract low interest rates is because the borrower is given ample time to pay back the loan. This means that you will have lower monthly repayment. Consolidated loans also have fixed interest rates meaning that you will not add even a single cent when interest rates in the market fluctuate. In addition to that, you have the freedom to make early repayments.
5. Additional repayments plans
Besides making single monthly payments, loan consolidation will provide additional repayments plans. Consolidated loans offer a variety of options to the borrower including income-based repayment plans.