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10 scary facts about student loan consolidation

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Top Ten Behind the Scenes Secrets to Student Loan Consolidation
(so you can have the maximum financial gain and minimize your repayment)

10. Weighted Average Debunked

The weighted average does not fundamentally alter the underlying cost of your loan. It preserves the cost structure.

Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The amount of interest you pay over the lifetime of the loan will be about the same. Questions?: student loans forum

9. Basic Repayment Plan Myth

Some lenders have been encouraging borrowers to obtain extended repayments on their consolidation loans. They do this in subtle ways, such as using a 20 year term instead of a 10 year term in their repayment examples.

You are not required to pick an alternate repayment term, like extended repayment. You can stay with a standard ten-year repayment even when you consolidate. Questions?: student loans forum

8. Grace Period Concern

Consolidation loans do not have grace periods, so the consolidation loan enters repayment within 60 days. BUT If the lender delays disbursing the consolidation loan until the end of the grace period then the you get to retain most of it. Questions?: student loans forum

7. Attention Parents: Use the Loopholes

Consolidating an 8.5% fixed rate PLUS loan reduces the interest rate by 0.25% because of the lower 8.25% interest rate cap on consolidation loans. To maximize the interest rate reduction, the PLUS loans must be consolidated by themselves. Questions?: student loans forum

6. How to Reset Your Repayment Money Clock

Consolidation resets the 3-year clock on certain deferments and forbearances. A consolidation loan is a new loan, with its own fresh set of deferments and forbearances. Questions?: student loans forum

5. Switch ‘em Up

Consolidating your loans allows you to switch from one lender to another. You can also switch from Direct Loans to FFEL and vice versa. If you shop around, you might be able to get a better discount on loan interest rates and better rebates on the fees. Questions?: student loans forum

4. Why is my Loan Growing?

Loan capitalization is the culprit. Accrued interest on an unsubsidized Stafford Loan must be added to the balance when the loan is consolidated. Questions?: student loans forum

3. Forbearance Makes your Life Miserable Later

Forbearance is an easy way to postpone payments when things are tight, but it doesn’t do anything to prevent interest from accruing. During all those months you don’t make payments, your unpaid interest is silently waiting to add itself to your balance. Beware of Forbearance! Questions?: student loans forum

2. The X Factor: How to Get Loan Discounts

Yes, interest rate reductions will save you a ton of money over the life of the loan as long as you can get them. The reality is that less than 15% of borrowers actually sign up for the auto debit, and only 10% are able to make full on time payments for the stipulated benefit term. The odds are against you, but that’s’ why we still go to Vegas, right? Questions?: student loans forum

1. Reading Phantom Deadlines

Ah yes, the phantom deadline imposed by your friendly over the phone “loan consultant.” There are two deadlines you need to know for consolidation loans: July 1 and grace period end date. Questions?: student loans forum

Rates reset on variable student loans every July 1. In the past two years, rates have risen from historic lows, but this year the rates will remain the same. If someone told you rates are going up this summer, they are lying. Questions?: student loans forum

Grace period is important because it allows you to take advantage of the 0.6% rate discount built into your six month deferment. If someone says they will give you a 0.6% rate reduction, they are lying. The rate reduction is already factored into the loan and they are not “giving” you anything. They’re spinning. Questions?: student loans forum

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Convinced? Then submit a free application for student consolidation online.

CLF can lower your monthly payments and get you extended payment scheduling.

You can also call us with questions:

College Loan Financial
6317 Heritage Drive • Carlsbad, CA 92009 • Ph: (800) 440-8664 Ext. 18