Just finished school and now it’s time to start paying on those

Student loans fall into two categories.

1. A private student loan which was based on your credit or that of your parents. Loans of this nature may be consolidated through standard loan consolidation.

2. Federally funded student loans were backed by the federal government. You may have received them from a private institution but if you default on them the government guaranteed the funding organization that it would make the loan good. These loans have very strict rules regarding consolidation.

If you want to consolidate a student loan that was federally funded below are some tips for doing so.

A federally funded student loanwill not be discharged in a bankruptcy except in circumstances of extreme hardship. Hardship in this case may mean that you have no money left at all after paying for essential needs such as rent and food. Even people on disability and public assistance are often times found ineligible to have their loans discharged.

In certain situations for short periods after you have left school your student loan may be subject to forbearance. During this period of time you pay only the interest on the loan. Forbearance is generally allowed for a time period of thirty-six months. Applying for student loan forbearance is not an option if you have allowed you loan to go into collection.

A private student loan should not be and, in many cases, cannot be consolidated with a federally funded student loan. Once a private student loan is rolled in with a federally funded loan, it becomes subject to the same rules and restrictions as the federally funded loan. If you have both types of loans seek separate consolidation services. A federally funded student loan also cannot be consolidated with credit card debt.

If you are considering consolidation of your student loans, gathering the appropriate information and acting quickly is well advised. Grace periods apply to the ability to consolidate your student loan. Once the grace period has expired it is exceptionally difficult if not impossible to consolidate your loans.

The interest rate of the newly consolidated student loan will be a weighted average of all the loans which are within the consolidation package. Currently there is a cap of 8.25% on the new interest rate. However, in the current environment of escalating interest rates, this cap may be raised. The potential for a higher interest rate in the foreseeable future is another good reason to think about consolidating your student loans. Even though the interest rate on your new student loan may not be substantially lower than the interest rates on your current loans the period over which it is repaid may be extended thus lowering your payment.

A student loan can only be consolidated one time unless a newly funded loan is included in the second package. Therefore, it is extremely important to make sure you include all of your current federally funded loans in the first consolidation loan.

A student loan is a lifetime obligation if allowed to go into default. Failure to make payments is reported to credit agencies just like any other debt. So, before your student loan gets out of hand consider consolidating your studnet loan today.