There are many lenders competing to meet your federal student loan consolidation needs, all with different terms and benefits. Which one is right for you? There are a few things you should know before you sign up for any federal student loan consolidation.
Federal Student Loan Consolidation Basics
... the ... thing I am proudest of in my whole business life is that I do not take, that I never took in all my life, and never, never! will take, one single penny more than 6% on any loan or any contract.
—Hetty Green (1834–1916)
The fixed interest rate for a consolidation loan is determined by a federally mandated weighted average calculation that every lender must use when determining the interest rate for federal consolidation loans. In other words, the fixed interest rate should be the same no matter who you speak to. The term of your loan is also determined by the federal government based solely on your loan balance. Your base interest rate, length of loan and deferral benefits will be the same no matter who you call. So why choose one lender over another? There are two main points you should consider when comparing lenders repayment incentives and customer service.
Repayment incentives – Your base interest rate is determined by the government but a lender can offer you repayment incentives. Some common repayment incentives are a percentage off of your interest rate for an automatic deduction from a checking or savings account, an interest rate percentage reduction after a certain number of on time payments, or reduction or repayment of origination fees. Some companies offer cash up front rebates for consolidation which can seem like a good idea but you will almost always come out ahead in the long run with an interest rate reduction. The lender should be able to provide you with an amortized repayment schedule showing you exactly what the loan will cost you.
Customer service – Can the lender provide all the types of loans you are interested in and handle your post-graduation consolidation? How hard is it to get an actual person on the phone? Are the customer service personnel friendly and knowledgeable? Do they have a website with 24 hour access to your account? Can you apply online? Do they have flexible repayment options? These are all important questions when choosing a lender. No amount of incentives are worth it if you cannot deal with the company. Be sure to choose a lender who will treat you as a valued customer.
Federal Education Services is a company that specializes in federal student loan consolidation, Stafford loan origination, PLUS and Graduate PLUS loan origination and as a resource for students with questions regarding educational financing. For any questions regarding this article please contact Federal Education Services. A friendly loan specialist can be reached at (877) 222-4727 or you can find us on the web at www.feded.net.