Student Loans Available In The US Are Of Two Types

Student loans available in the US are of two types. Another is the private student loan which is given by non- government lending institutions.

The first is the federal student loan which is given by the government, which in US is the Department of Education's Federal Student Aid Program. The rates of interest are higher on private loans than on federal loans. Most debt consolidators would not even commit themselves to get private student loans consolidated. Furthermore, it is much easier to consolidate federal loans than non- government private loans. Students with loans actually find themselves in bigger problems than students without loans. This is why many students are looking at debt consolidation as a viable method of solving their problems of indebtedness.

With a loan, the student has to make the monthly payments in addition to the various other bills. Debt consolidation has become popular among students in various other names, such as bill consolidation, debt negotiation and debt settlement. When a student approaches a debt consolidator, he/ she would take some money from the student and put it into an escrow account. Actually debt consolidation is a simple process of combining all the existing loans of the student into one single loan with a lower rate of interest. When sufficient amount of money is built up in this account, then the consolidator would initiate talks with the creditors and request them to lower their rates of interest. The student will then have to pay back only to the consolidating agent. Once this is done( and if it is done) , the consolidator will pay off their debts from the escrow.

Schools themselves come forward sometimes and suggest names of reputable debt consolidating agencies to their students. This is done by referring the student to a debt consolidator. Or else, the government also helps in consolidation, provided the loans are federal loans. In case a student has a mixture of federal and private loans, then it is not advisable to consolidate them together. Obviously, federal loans can be consolidated only after the student has come out of school. This is because the two kinds of loans will likely have different rates of interest.

One condition is that the student must not be defaulting on payments and there is a minimum amount of loan that can be consolidated. For those who do not want to consolidate their private loans but want to make the repayment easier, Citibank has an attractive program, which can be accessed at StudentLoan. com. In most states this minimum limit is$ 10, 00Consolidation of private loans has laxer rules, but then the expenses are higher. Surveys have shown that the amounts paid on student loans tend to be higher than students' incomes in the first few years. But this is not always the case. Private institutions provide loans to students thinking that they would make a higher income as the degree of education would go higher.

Hence, students are opting for debt consolidation as a way out of this circle of indebtedness.