Student loan consolidation, also known as student loan refinancing program, can be termed as an effective debt clearance strategy. Apart from clearing the debt, a student can also save a good amount of money through student consolidation loan since this loan is offered at lower interest rates and requires the student to pay lower monthly repayments. However, one needs to consider certain facts while opting for a student consolidated loan.

Financial Counseling:

Consolidation loan is not the only solution for student debt management. There are other viable options that can be used as an alternative. Information about these options is available with the financial-aid office. Hence, it is important for students to consult a financial counselor before considering a student consolidation loan.

Refinancing during grace period:

Federal loans such as Stafford loans provide students with a six-month grace period. This grace can be availed even after the student has graduated from the school. Loan repayment starts only after the grace period has ended. This is the right time to consolidate a student loan as the interest rates during the grace period are far less than the rates after the expiry of the grace period. Once the student is employed, interest rates are determined based on the income.

Lender Initiatives:

So as to sustain in the market and be competitive, several financial organizations and private lending firms offer a variety of packages and promotional offers so as to attract customers. Some of these include reduced interest rates, flexible repayment options, reduction on on-time payments and auto debit option. Since, there are several lending firms providing consolidated student loans, it is better to shop around so as to get the best deal.

Another useful strategy is to opt for a variable interest loan during the initial years. Once the interest rate decreases to a considerable level, the variable interest rate loan can be switched to a fixed interest rate loan. Federal and private student loans should never be combined while opting for a consolidated loan. Under certain exceptional situations, students with Perkins loans are not required to pay back their loan amount if they work for a prescribed number of hours in professions such as teaching or community service.

By: Pauline Go