Today's college students find it almost impossible to get through school without the need for student loans. However, when they are done with their education and begin paying down those loans, many graduates find that they have bitten off more then they can really handle. The multiple monthly payments are difficult to keep track of, creating financial problems for many new graduates.
Most federal students loans can be consolidated. Private school loans can also be consolidated through private lenders. Most students, however, are using federal loans and need federal student loan consolidation programs.
Federal student loan consolidation programs use a specific formula to determine the interest rate of the new loan. Your interest rate will be the average of all of the loans you have, weighted to account for how much you actually owe, and rounded to the nearest 1/8 of a percent. There is an 8.25% cap on student loan consolidation programs.
Because the average is weighted, you will not save any money with a federal student loan consolidation program. However, you will be able to manage your repayment easier using this type of a program, as you will not have to deal with several payments each month. This is the main reason that most graduates turn to student loan consolidation programs.
These student loan consolidation programs do not cost you any money, other than the interest you are paying on the loan. You will not pay upfront fees for this service. If you are charged a fee to set up a loan, you are dealing with a scam artist, not a legitimate federal student loan consolidation program.
Anyone carrying student loans is eligible to consolidate, including parents of students. However, married graduates cannot consolidate their separate loans into one student loan consolidation program. Students cannot consolidate while they are still attending school. Loans can be consolidated during the grace period or after the loan has entered the repayment period.