Education loans or student loans have become really common these days. These loans are usually taken for studying abroad or other combined expenses like accommodation, tuition fees, etc but the reality is the burden of student loan debt has been increasing steadily over the past few decades. More than 44 Lakh people carry an average of over INR 25 Lakh in student loan debt, which creates a significant financial burden for the borrowers. So today we bring this interesting blog that will help students to consolidate student loans and reduce their monthly expenses or EMI. So don’t miss out on this and continue reading.
Consolidate Student Loans Meaning
Consolidation is the process of combining multiple loans into one new loan with one monthly payment or you can say EMI. It’s important to note that consolidation is different from refinancing. When you refinance your loans, you take out a new loan with new terms to pay off your existing loans. Consolidation involves combining your existing loans into one new loan with its own terms. The goal of consolidation is simple: make it easier for borrowers to manage their student loan debt by simplifying payments and potentially lowering interest rates. By consolidating your loans into one payment instead of multiple payments spread out across different lenders and servicers, you’ll have more control over your finances.
Also Read: Student Loan Eligibility
Benefits of Student Loan Consolidation
We all know that studying abroad comes at the cost of different expenses and the last thing you should be concerned about is managing your finances as the study should be the first priority. Here are some of the reasons why you should consolidate student loans, benefits are as follows:
- One of the biggest benefits of consolidating your student loans is that you can extend your repayment terms. This means that you can lower your monthly payments by spreading them out over a longer period of time. Just to keep things transparent, this might be a temporary relief but this also means that you need to pay more interest on the loan taken.
- Instead of having multiple loans and loan payments, you have only one. This can make it easier to manage your budget and avoid missing or late payments.
- Consolidated student loans can convert variable interest rates into a fixed rate that won’t change over time. This can protect you from rising interest rates in the future and help you plan your payments more accurately.
Also Read- What is the Student Loan Eligibility Criteria for Studying Abroad?
Eligibility for Consolidate Student Loans
Here are the basic eligibility criteria to qualify for the consolidation of student loans, take a look at them below:
- Your loans must have been acquired under the Direct Loan Program or Family Education Loan Program. Depending on the banks the terms can be different
- Your credit history should be healthy and have a minimum CIBIL score of 740 or above. In layman’s terms, you should perform repayment regularly and if you have defaulted earlier your chances of consolidating student loans decreases drastically.
- You must complete your schooling and should not take a gap year
- You must have an active bank account with a debit card and a chequebook
Documents Required
To consolidate student loans, here are some of the necessary documents that will come in handy:
- Your proof of income or borrower’s income proof (as per bank or the provider)
- Your proof of identity like driving licence or Aadhar Card
- Proof of citizenship or residency status such as a Voter ID Card, Birth Certificate
- Your bank account information with a debit card and chequebook
- Credit History Report
- All previous loan-related sanction letters that you want to consolidate
Relevant Read- Student Loan- Refinance/Consolidation Process
Consolidate Students Loans Process
You can follow this simple guide on how you can consolidate student loans:
- To consolidate your student loans, you need to apply for a Direct Consolidation Loan through the Department of Education’s website or by dropping a mail.
- You can choose which loans you want to consolidate, and you will have the option to select a new repayment plan and a new loan servicer.
- There is another online procedure as it involves various background checks and it’s recommended to visit the branch of the bank you want to consolidate student loans.
- In case you are wondering which bank can be ideal for the consolidation of students loan then you should definitely check out Federal Student Loan consolidation as it offers low-interest rates and tenure of up to 30 Years.
Best Student Loan Consolidation
Apart from Federal Student Loans here are some of the other options on how you can consolidate student loans:
- LendKey
- SoFi
- Earnest
- Citizens Bank
- PenFed
FAQs
Yes, it will directly affect your credit score as when applying for consolidation, a hard credit inquiry will be conducted which could temporarily lower your score. However, once approved and payments are made on time each month, consolidation can actually have a positive effect on credit scores by reducing the debt-to-income ratio.
No, you cannot consolidate your student loans while in school. You must have graduated, left school or dropped below half-time enrollment to consolidate student loans.
Most banks or providers don’t consolidate student loans if defaulted as they look only for credit-worthy customers. Still, if you provide a proper income-driven repayment plan and resolve some issues then there are chances of getting your loan approved.
Student loan consolidation is a process that combines multiple loans into one new loan with a single payment made monthly to one loan service.
This was everything related to Consolidate Student Loans. Reach out to Fly Finance for all finance-related concerns to simplify your study abroad experience with zero hindrances.
