Student Loan Consolidation Comparison

Federal loan student consolidation or private student loan consolidation? Which one is better? Below is the student loan consolidation comparison that you should know,

Federal Student Loan Consolidation

• Offered by federal government of USA.
• Is possible to reduce monthly payment up to 50%.
• Accept all federal loans from eligible borrowers which mean that personal loans like credit card, car or mortgages are not accepted and spouse consolidation is no longer accepted.
• Lower interest rate (fix rate) by spreading the loan period.
• 4 repayment plans – simple repayment plan, extended repayment plan, graduated repayment plan and income contingent repayment plan.
• Interest is tax deductible.
• Loans can be consolidated during the studying period.
• Doesn't require co-reference, employment and credit check.
• Eligible for forbearance and deferment.
• Loan is write off when the borrowers pass away and shall not be transferable to the next of kin.
• No fees required to consolidate the student loans.

Private Student Loan Consolidation

• Offered by banks, credit unions and other loan agencies.
• Open to anyone who wants to consolidate the student loans with private sector and who is not eligible for federal student loan consolidation program.
• 4 repayment plans – simple repayment plan, extended repayment plan, graduated repayment plan and income sensitive repayment plan.
• Interest rate fluctuates with the current market interest rate and in can be higher than federal student loans consolidation.
• Interest is not eligible for tax deduction.
• Loan can be consolidated after the education period and the loans are in grace period.
• Next of kin has to service the loan when borrowers pass away.
• Not eligible for forbearance and deferment.
• Depending on the agency, co-reference, employment and credit check is needed.
• Depending on the agency, minimum fees might be required for student loans consolidation.
• Depending on the agency, pre-payment penalties might not be necessary.
• Minimum loan amount is sometime required.

As you can see, there are pros and cons among the 2 student loans consolidation program. It is best that you will talk to the respective agencies to get more details about the program so that you can make a thorough comparison between the 2 programs.

You can manage your finance,

Michael W.