Terms to Understand with Student Loan Consolidation

Student loan consolidation can be a big step towards financial freedom. With consolidation programs you can lower your interest rate and pay off debt faster. You can also lower your monthly payments to help out if you are in a crunch. Since most people have to take out multiple student loans to finance their educational goals, it can be difficult to keep up with everything once all the loans are due. A good consolidation program can help you keep everything organized and protect your credit. If you are considering student loan consolidation, here are a couple of terms you should become familiar with.


When you hear the word ‘term’ used with student loan consolidation programs, it is referring specifically to the amount of time you will pay back the loan. Some programs for student loan consolidation offer terms as long as 30 years, and as short as 5 years. What you need to consider is the amount of money you are responsible for with the loan. A 5 year term will allow you to pay down your student loan debt much faster, but will leave you with payments that are pretty high. A 30 year term will cut your monthly payments down drastically, but will leave you paying much more in interest over the years. When you start to compare student loan consolidation programs, you want to keep this in mind.

Forgiveness Circumstances

Some federal student loans will have programs built in for forgiveness. If you experienced a hardship you may be able to have part of your loan written off without affecting your credit. Some other programs will forgive a portion of your loan based on the career field you are in. For instance, those who chose to join volunteer programs like the Peace Corps may be able to apply for forgiveness on federal loans. The forgiven portion of any loan is just wiped out, meaning you won’t have to worry about consolidation for this. If you are in a tight financial position, looking in to forgiveness is a great idea before you choose to consolidate the loans.

Student Loan Consolidation and Grace Periods

When it comes to credit, most people assume a grace period is the amount of time you have to make your monthly payments without penalty. With student loan consolidation services the term has a slightly different meaning. Instead of referring to the time you have each month without a payment due, it actually refers to the amount of time you have between graduating and paying back the loan. In most cases you can’t start consolidation until after the grace period for all the loans is over. The exception to this is if you are paying back loans for one degree while working on getting another degree. In these situations your original loans may come due before the current loans grace period is up. You can still consolidate, you just may not be able to lump the newer loans in to the program. A flexible student loan consolidation program will allow you to add these in after the grace period.


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