A college education is one of the most significant investment in a person’s life but it is also one the most expensive needs.

The publicly reported tuition fee by private colleges and universities for the 2007-2008 is about $50,000 a year. Last academic year, more than $78 billion was used for student loans, both federally as well as private.

Find the best student loan consolidation

Student loan consolidation helps you to bring together all student loans into one single loan so that you can pay a lesser monthly payment and have a better monthly cash flow.

Federal student loan consolidation is one such student loan consolidation which is very cost effective.

If you are interested in opting for a best student loan consolidation, you need to have the following eligibility:

• You need to be a student or parent having federal loans which haven’t been consolidated as yet.

• You are either still studying in a college and would be graduating within next six months or have already passed out of school and are replaying your loans.

• You have more than one lender holding your loans with a total loan amount exceeding $15000.

When you opt for student loan consolidation, you can reduce your monthly student loan payment by about 60 percent. The most important aspect for choosing a best student loan consolidation is to choose the right lender and the right interest rate. While choosing the best lender, you should look for payment fees, interest rates and loan terms.

The beauty of student loan consolidation is that you have one fixed interest rate that is dependent on an average of your loans’ current rates. You need not worry about paying more when the interest rates increase, which is a common risk among variable-rate loans such as the Stafford or PLUS.

Reasons to consolidate

You need to have student loan consolidation to lower the monthly payments or to save your money over a period of time.

If you want to reduce your monthly payments, you can increase your repayment period for over 10-year term which is common among federal student loans. By doing so you will land up paying more interest as you will be making payments for a longer length of time.

Federal Consolidation Interest Rate

Federal Consolidation interest rates are dependent on the average of student loan interest rates. Federal student loans distributed on or after July 1, 2006 have an interest rate of 6.8%. These interests rates change every year but will never increase above 8.25%. Federal student loans given before July 1, 2006 will remain variable interest rate loans. These loans will change every July 1 based on the results of the 91-day Treasury Bill.

A private student loan can take off some of the sting of collegiate expenses. Everyone knows how intimidating the cost of college can be, so it makes sense to look into as many types of loans as you can. While private student loans tend to have higher interest rates, they are becoming a viable option for many students.

Private versus Federal

A federal student loan comes in a wide range of options. Students can choose from Perkins loans, Stafford loans or PLUS loans. Students who need financial aid to pay for college can also receive money through federal grants or scholarships.

Federal loans will usually have a fixed interest rate for students to pay back after they graduate. A federal student loan also offers a student who is having trouble finding a job, or is in financial strain, to defer payments for a period until they are able to pay off the debt. A final bonus to having a federal student loan is they can be consolidated into one loan.

Private student loans, on the other hand, are very different from federal loans. Private loans can’t be consolidated after a student graduates from college or graduate school, and there are no limits as to what the interest rate will be for a private loan.

So a student who signs up for a private student loan at six percent can end up paying as much as 19 percent after they graduate. Private student loans can also check up on a student’s credit history and charge more if a student has poor credit records or no history at all.

Why Private Loans are on the Rise

There are several obvious benefits to using a federal student loan. The lower interest rate is one of them. On the other hand, a private student loan has a reputation for offering a more comprehensive coverage during the course of students’ collegiate careers.

According to Collegebound, tuition and expenses for 4-year of college in the United States increased by five thousand dollars for the 2006-07 academic school years. With these types of costs escalating, parents who are reaching retirement age are finding it hard to fund college and their retirement plan at the same time. Instead of going for a lower amount, but more flexible federal loan, parents are co-signing onto their child’s private loan.

Another reason why a private student loan has become more popular nowadays is the aggressive marketing schemes used by companies who promote private student loans. Students who research various loan sites will encounter thousand upon thousands of possibilities, all offering low rates, and fast application processes. Students who are uninformed about the type of student loans available end up making a poor decision that costs them more money in the end.

Make your time in college - and your time after college - easier by finding the right loan or loans for you. A private student loan will cover your education throughout its entirety and will give you the peace of mind that comes from knowing you are covered. Speak with your financial advisor to see what they think you ought to do.




By: MIKE SELVON