After graduation from college, students are suddenly hit with the reality of the cost of their student loans. Especially in hard economic times, when employment is scarce, even getting started paying off student loans can be incredibly difficult. Recent graduates are left with piles of debt and often do not have the resources to begin reducing their loans. Years later, college graduates still have problems paying back the money they borrowed for their education.
To ease the financial stress of student loans, many recent graduates or parents of recent college students decide to consolidate their student loans. Through consolidation, former students can reduce their interest rates, simplify their payments, and lengthen the amount of time provided to pay back the loan.
A consolidation loan allows the combination of several student loans or parent loans from either a single lender or multiple lenders into one large loan from one lender. This loan is then used to pay off the balances on other loans immediately, while at the same time providing the borrower with more time to pay back the money. Even if a student only has one loan, he or she may consolidate it in order to reduce interest rates and lengthen the pay-back period.
Most federal loans qualify for consolidation loans, including:
- FELP (Stafford, PLUS and SLS)
- Health Professional Student Loans
- Guaranteed Student Loans and Direct loans
In addition, certain lenders offer consolidation loans for particular private education loans.