Best Time To Consolidate Federal Student Loans

There are a lot of college graduates looking to consolidate federal student loans because of too many loan accounts taken out in college. As many as the years it took to finish the course, so are the student loans that was used to finance the college education. Cost of attendance is not cheap and in fact has been increasing year on year,

This is one of the main reasons why student loan borrowers are choosing to consolidate federal student loans, to simplify the process. From having to juggle a lot of student loan accounts every month, consolidating the loan will yield one payment amount, one interest rate and one payment due date.

It is because of this unique advantage that college debt holders are choosing to consolidate their federal loans. Plus the fact that the interest rate is just averaged. Even though the new rate will be higher than the previously lowest rate, it will also be lower the what used to be a high interest rate. With this in mind, when is the best time for student loan borrowers to start processing their federal loan  consolidation?

Best time to consolidate federal loans

There are  a lot of student loan borrowers who are undergoing federal loan consolidation at different points in their life. There are those who feel it is just right to start consolidating while in senior college year while some prefer consolidating a good few years into their job. It really works differently for people but here are two best times to consider when you want to consolidate federal student loans.

Grace period

Federal student loans has a grace period from the time a borrower separates from school. It commonly means graduation after fulfilling the units needed to graduate with the chosen major. Separation from school could also mean falling below half-time student status. This could be from taking few units on a given school year. Dropping out from school also equates to separating from the school.

All the instances mentioned above can trigger the grace period to start for federal student loans. This is normally a six-month period that the government provides to borrowers that are already separated from school to get a job. And this is normally what graduates do with the time they have for their payment grace period,they look for  a job to be able to make the payments in their student loans.

But this is also a good time to consider and prepare the necessary documents to consolidate federal student loans. This will work best if a borrower has multiple student loans because it will combine all the accounts under one payment amount with one interest rate due on a single payment date. Having to consolidate federal student loans is also easy because the government made the application online. You just have to log in to Studentloans.gov.

While in payment postponement

Deferment honors the subsidy of payment interest on subsidized student loans and those that are not qualified for them can look into forbearance. Student loan holders who are encountering financial hardships are those that apply for these payment postponements.

While in deferment or forbearance, you can look into consolidating your student loans to be able to manage them more easily when you resume repayment on your college debt. There is a big chance that your interest will accrue for unsubsidized student loans or when you are in forbearance but this is better than defaulting on your payment. While you are trying to get back on your feet financially, it is best to prepare to consolidate federal student loans while you are not making payments.

Repayment status of student loan borrowers

Just as any other loans, student debt has to be repaid at some point. Federal student loans are even better than most consumer loans because repayment only starts after separation from school past the grace period. But for those carrying student loans, only a few are current on their payments.
  • Payment postponement. There are 44% of student loan borrowers who postponed paying for their student loans as of 2012. From these borrowers, the 30% are in forbearance and has their interest payments accruing by the month. The other 14% are in deferment and their payments are still the same amount.
  • In repayment. About 56% of the student loan holders are already at the repaying stage of their college debt. Newyorkfed.org shared that 39% are current on their payments and around 17% are behind on their payments

Things to do before consolidating federal student loans

As you choose to consolidate federal student loans, here are a few things that you can look into to prepare for loan consolidation.
  • Look for all original documents. Whenever you take out federal student loans, you need to take good care of the loan documents being given to you. It is best to have electronic copies for back-ups but you still need to have the original loan documents for your file and reference.
  • Audit all student loans. With all your documents, you can easily do an inventory of all you student loans. All the amounts and interest rates. You will need all these information to be able to apply for a DIrect Consolidation Loan for federal student loans. You need to include all your federal student loans so you can maximize the benefits of the program.
  • Get an estimate using a student loan payment calculator. Before you consolidate federal student loans, it would be great to check out the payment amounts using a student loan payment calculator. This will help you manage payment expectations and prepare you for what the estimate amount would be. It will also show you how much interest payment you will be making.It can even compare other repayment options suchas standard repayment and income-based plans.
  • Talk to your loan servicer. It is best to communicate with your loan servicer to let them know of your plan and to double check the loan details that you have with you. They can also let you know about other repayment options that are available for your federal student loans. They can also give you more information about loan consolidation especially if you have questions about the process.
  • Direct consolidation loan. This is the process where most of federal student loans are consolidated and the interest rates are averaged. This is an easy process and it would help to learn as much about it as possible.

Preparing for loan consolidation

Here are a few more things you need to look into when you are already set in consolidating your federal student loans.
  • Salary. Be sure to have a steady source of income. It normally comes from a steady employment or a good business opportunity.
  • Self improvement. It could benefit your capacity to earn more if you look on how you can invest in improving your skills as an employee or as a business owner.
  • Funds. As you consolidate your loans and find that it frees up some dollars on your budget. it is best to start up some essential funds you would need in life. This can include an emergency fund and a retirement fund. You can also start saving for a college fund for your future kids to prevent the same thing from happening to them.
When you want to consolidate federal student loans to make the repayment easier, there are perfect opportunities to do this. But be sure you are prepared by having all the documents, looking into the possible payment amounts and making sure you are able to meet the payments.
Best Time To Consolidate Federal Student Loans Best Time To Consolidate Federal Student Loans Reviewed by darkmatticus on January 14, 2019 Rating: 5
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