If Federal student aid is not enough to meet your educational expenses, then you can avail of college loans from a private lender. Private loans can also help medical, dental and legal students meet post-graduation expenses, such as the cost of finding a residency or reviewing for the bar, since these are not eligible for Federal aid programs. The advantage of private loans is that you can apply at any time, there are no eligibility requirements as long as you are creditworthy and you don't have to begin repayments until after graduation.
And once you've started repayments, you can take advantage of private loan consolidation programs. Loan consolidation combines all your private college loans into one fixed-rate loan with lower monthly payments, freeing up money that you might need for daily living or job-related expenses. With a consolidated loan, you may end up reducing your monthly payments by as much as eighty percent. However, you cannot consolidate Federal student loans along with private loans.
Other advantages of private student loan consolidation include a longer repayment term (of up to 25 to 30 years), reduced interest rates for borrowers with improved credit scores, deferments on monthly payments of 36 months for military men in active service and 48 months for medical and dental graduates taking up their residencies, and no penalties for over payments, meaning payments in excess of the required minimum go towards repayment of the principal of the loan. Consolidating your loan may also help improve your credit score since it cuts down on the number of open credit accounts that you have.
However, expect interest rates for private student loan consolidation to be higher than those from Federal loan consolidation. Interest for private student loans is based on LIBOR or prime rates, unlike Federal Stafford loans are fixed at 6%-6.5 percent. Also note that some lenders charge fees which could wipe out gains from low interest rates. Try and pick a loan with no fees, even if it charges slightly higher interest rates.
To qualify for a consolidation loan, you should owe at least $5,000 in student loans but no more than $250,000. When applying for private student loan consolidation, it is highly recommended that you apply with a qualified co-signer, as this will increase the chances of your loan being approved and might even qualify you for a lower interest rate. Choose a loan whose interest rates are based on the LIBOR, since it will be less expensive in the long-run. You also need to continue servicing your loans while the consolidation is being processed in order to maintain your creditworthiness.
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