What You May Not Know about Consolidating Education Loans

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ScholarPoint Advises Borrowers on Saving Money

Refinancing education loans can be so simple and attractive that many borrowers tend to overlook some critical points about student loan refinancing.

“Sometimes what borrowers don’t know could save them a great deal of money, time, and frustration,” says Chris Studer, President and CEO of ScholarPoint. “Student loans have become a fact of life for most students today and the following little know facts can save them big bucks when refinancing education loans.”

Consolidation Loans have a fixed interest rate versus a variable interest rate

Most education loans have a variable interest rate which can mean significant changes in the monthly payments when interest rates increased on July 1st, 2006. With a fixed interest rate, the monthly payments and total payoff balance is a set amount. Some education loans such as the Perkins Loan and the HPSL (Health Professionals Student Loan) are fixed rate loans. Before consolidating it’s important to weigh the repayment benefits of rolling these kinds of loans into the consolidation.

Consolidation lenders vary significantly in terms of money-saving incentives

What separates one lender from another when it comes to consolidating education loans are the types of incentives each offers. Lender incentives can greatly reduce monthly payments and the total amount owed over the lifetime of the loan. Many lenders offer incentives for auto-debit payments, but rarely more than .25%. Another standard incentive is a 1% reduction in interest rates after 36 months of on-time payments. When shopping for a lender to consolidate your education loans, look for one that goes above and beyond these standards. ScholarPoint for example, offers an auto-debit interest rate discount of .50% and a 1% reduction in interest after only 24 months, a full year earlier than the norm.

Your loans must be current in order to consolidate education loans

If you’re behind on your loan payments, you’ll need to get caught up before refinancing. Once you refinance, you’ll most likely enjoy much lower monthly payments to ease your budget once you are caught up.

Private education loans and federal education loans cannot be combined when refinancing

Federal student loans are funds lent by the government or authorized education lenders. These loans are guaranteed and subsidized by the federal government and have to be certified by your school. The most common name for Federal student loans is Stafford (subsidized or unsubsidized, PLUS, and Perkins. Private student loans are credit-based loans offered by independent lenders. These loans tend to have a higher rate of interest and may require a co-signer. Those who have both types of education loans will need to secure 2 different consolidation loans. It’s best to consolidate federal education loans first then start the process of consolidating your private education loans. You can however, consolidate federal subsidized and unsubsidized loans together. They do need to be tracked separately, but a quality lender will take care of this for you.

Your deferment and forbearance limits start over when you consolidate

One of the most important benefits of education loans is that they allow students to put their loans in to deferment or forbearance status during difficult times encountered while building their careers. When you refinance, you are essentially getting a whole new loan, meaning that in most cases your deferment and forbearance limits are reset.

Consolidating during the post graduation grace period allows you to lock in the lowest rate

Interest rates during the grace period (6 months after graduation) are .60% lower than after the grace period when loans move into repayment status. Consolidating before the grace period is over helps to lock in this much lower interest rate. It’s best to start the consolidation process soon after graduation to ensure that there is adequate processing time. You can specify that your new consolidated loan begin at the end of your grace period so that you may enjoy both benefits.

Refinancing education loans is one of the easiest ways to lower monthly bills and make paying back your college education affordable. Keeping these little known facts in mind can save you a great deal of money and make consolidating your education loans a smooth and simple process.

ScholarPoint Financial, Inc. is a national online consumer lending company specializing in student loans and offering a full range of innovative education finance solutions. Loan options for students and their families include PLUS, Stafford, Consolidation and Private loans. ScholarPoint combines industry-leading borrower benefits, best-in-class service and innovative technology. Unlike many other traditional loan sites, ScholarPoint’s technology platform was designed exclusively for its website, integrating the entire process for an online experience that is simple, instant, and complete. http://www.ScholarPoint.com

Joan B. Coyle

Vice President for Public Relations

Washington Partners, LLC

1101 Vermont Avenue, NW, Suite 400

Washington, DC 20005

202-289-3903

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Joan B. Coyle

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