This site contains informative articles about Student Loan Consolidation. student loan consolidation rules,student loan consolidation rebates

Saturday, March 27, 2010

guide to student loans

Federal student loans are an even better deal than before. Rates are fixed now, rather than variable, and students with the most need will see rates as low as 3.4% in the future. Limits on how much you can borrow have been raised a bit, and parents who take out parental student loans now can defer payments while their kids are still in school. Although some lenders have exited the federal student loan market, the U.S. government has stepped into make sure the remaining lenders had access to cash to make loaning.

"The government averted the crisis," said Mark Kantrowitz, the publisher of FinAid and a co-author of "FastWeb College Gold: The Step-by-Step Guide to Pay for College." "You don't have to worry about getting (federal) student loans."

Don't ask your lender for a consolidation loan. Consolidation allows you to make one payment instead of many, and you may be able to lower your payments by stretching out the repayment term from the usual 10 years to as many as 30. You still can consolidate your federal student loans, but you'll need to do so through the federal government. Lenders that used to make these loans have fled the market, saying they aren't profitable anymore. Visit the U.S. Department of Education's loan consolidation site to get starting.

More from MSN
Your 5-minute guide to college costs
Where to stash college savings
6 reasons not to save for kids' college
A survival guide for college grads
Find that first apartment

Private student loans are harder to get. If you want to borrow more than the federal student loan limits (which range from $5,500 to $7,500 a year for college students, depending on their year and type of loan), you typically would turn to private student loans. These come with variable rates that currently average 11% to 12%. Nevertheless lenders are demanding higher credit scores plus a co-signer these days.

"You used to be able to get a (private student) loan with a 620 FICO score," Kantrowitz said. "These days you need at least a 650 or even a 700."

Even if you qualify, you need to be extremely cautious about how much private student loan money you borrow. Here's why:

Those variable rates are only going to shoot higher when the economy recovers and interest rates rise, Kantrowitz cautioned. Typically, private student loan rates aren't capped, so the sky's, the limit.

Private loans don't come with the forgiveness and income-based repayment options now available for federal loans.

Private lenders will still loan you far more money than you can comfortably repay. They know you can't escape this debt, so they're comfortable piling it on. Student loaned debt typically can't be erased in bankruptcy court, and there is no limit on how long private lenders can pursue you for collection.

So it's up to you to set limits on how much you'll borrow and search for the best deals.


Post a Comment