How to Select a Student Loan Consolidation Program

By shewritesonline

Considering the changes in the economy, student loan consolidation programs are needed for borrowers looking for a repayment plan to minimize their debt.

With recent college graduates in 2009 bearing the weight of student loans with varying interest rates coupled with a lack of employment, the need to consolidate their student loans is not only pressing, but is mandatory. Before you consider combining your debt with one lender, you should thoroughly understand the college student loan consolidation.

So how do you select the appropriate debt consolidation programs? Follow these steps to select the perfect debt consolidation lenders to release the burden of student loans and federal aid.

Step 1
Determine your type of college student loan and interview various lenders.

Do you have private student loans or federal debt? According to a 2008 college Board study, 2 out 3 college students graduate with student loans.Federal student loans cannot be consolidated with private debt. And federal student loans start accruing interest the moment you take the loan.

Step 2
Select a student loan consolidation program based upon the lenders requirements and your ability to repay the debt quickly.

All loan consolidations follow the same procedure, (usually under the auspices of the "Federal Direct Loan Consolidation" program) the advantage to the borrower is to find a loan consolidation program with a low interest rate, no prepayment penalty and generous incentives.

Step 3
Consider your monthly student loan payments.

Calculate your monthly income for a minimum of 3 years. Because interest rates vary, and can flow from low to high over the years, calculate your payments at the highest interest rate to ensure that your can maintain and meet your student loan repayment plan. Also, the standard repayment term for a federal loan is 10 years.

Step 4
Ask your lender about various student loan consolidation programs or even a deferment.

Starting July of 2009, the federal government is offering repayment plans that are income-based for undergraduates. Based on the borrower's yearly salary, the monthly payment for the loan is capped at a fixed percentage that corresponds with the borrower's income. For this program the monthly payment is no more than 15 percent of the borrower's earnings.