If you are a current or former student with school loans, you have probably been
bombarded with mailed and online solicitations to consolidate your debt. The
loan application process can seem overwhelming, particularly if you have more
than a couple of loans issued from a number of lenders. However, it is generally
simple and straightforward if you are prepared. Here is a brief overview of what
you can expect when you decide to proceed with a student loan
consolidation application.
First, you will need to choose a lender. There are many to choose from, but,
in general, it's smart to stick to a well-established financial institution.
These lenders will have a variety of payment plans and discounts, and they will
be less likely to sell your loan to another lender in the future. There should
never be a charge or fee for anyone applying for student loan debt
consolidation. As well, a lender should not need to check your credit
because Federal student loans are guaranteed by the U.S. government.
Next, you will need to fill out an application. Remember to gather all
information on existing loans prior to filling out your application. Also, you
will need to supply personal references. Before you sign your name on the
application, make sure that you clearly understand the terms of the new loan.
Ask about incentives and discounts that can help reduce your payment. Many
lenders have downloadable forms and online calculators to determine the amount
you will pay with your new loan.
Once you have submitted your completed application, the lender will send each
of your loan holders a Loan Verification Certificate (LVC) to verify the amount
owed on each of your Federal student loans. You can expect that your existing
lenders will take up to 30 days to return the LVCs. Once these certificates are
processed, the interest rate will be calculated and a disclosure statement is
prepared. Checks will be issued to your lenders to pay off your loans, and your
new consolidated loan will be issued.
This entire process can take between 30 to 180 days to complete, and if
information is missing from your application, it can take even longer. Most
lenders have customer service representatives who will gladly keep you updated
on the status of your loan application. Remember to continue to pay on your
existing loans while your application is being processed. You will be
financially responsible for these loans until the new lender has paid off them
in full.
Finally, keep in mind that interest rates on student loans are adjusted
annually every July 1st. This year, rates will be increasing 2.1 percent. You
can be assured of the lower rate if you submit a completed application early.
Don't wait until the end of June to start the process. While it will take time
to process your student loan consolidation application, with a little
advanced preparation and research you can complete your application with minimal
effort. And, once your new loan is processed, you will most certainly be
thrilled with your lower payments.
