Student Banking today has given a progressive outlook to what initially seemed to be impossible. Student banking has given a way to that financial ease that accepts deposits from the students and creates credit for them whenever they are in need. Lending activities can be performed either directly or indirectly as per the norms decided between the consented parties. Due to their implication and resonance, the importance for student banking has increased in the financial system. It has had its influence on national economies, making the government much cooperative in providing subsidies and relieving the interest rates and lending help to create a system that is easy for the students to pay money in and out. The government along with the banks has tried to offer additional benefits such as an interest-free overdraft and also student loans for them to pursue their education easily without having to bear a burden of the financial hurdles.
What are student loans?
A loan is basically a sum of amount that the bank lends the customer as per their requirement which levies a certain rate of interest when paying back to the bank. A student loan, however, is a sum of amount that bank helpfully lends a student to pursue her/his studies and pay the bank back after the completion of their respective course. The student loan is designed in a manner to help the students pay for their university tuition, books, and living expenses. Different banks have different conditions, but, It may differ from other types of loans in that, that the rate of interest may be substantially lower and that the repayment schedule may be deferred or adjusted flexibly while the student is pursuing the course. It may however differ in all the different countries in consideration to the strict laws regulating unintended renegotiating and bankruptcy.
How to get Student loans?
Student loans when acquired from government institutions would probably be the best deal. This is because these loans generally tend to have lower interest rates, and some of their interest may even be paid or subsidized on student’s behalf. However, the students are firstly recommended to talk to their educational institution in case they provide any subsidiary help through scholarships. If not, then the students must prefer banks offering loans at different rates of interest. A government bank is likely to levy lesser rate of interest but it is suggested for the student to be very tactful and strategic while choosing the deal. The student must refer to all the banks with their particular options and then keeping their respective rate of interests and time periods offered in consideration, choose the loan best suitable.
The drawback of government banks is that they may not cover all of the student expenses. There are limits imposed on how much a student can borrow from them, and in case the student needs more they will have to refer to a private bank.
Can a student borrow more than one loan?
A student can also in such case borrow several loans at different suitable rate of interests and time periods to incur well for her/his needs as and when required. The only problem that arises with it is that the students find it difficult to keep a track of all the loans and their respective rate of interests and the due dates of their payments. This gets a lot tedious for a student to manage and hence they fail to repay as per the guidelines mentioned by the bank. To get over the fastidiousness of the system, the banks have devised a newer scheme called the Consolidation of Student Loan Debt. This has been a powerful option for the students to choose and lower the risk of being bankrupt.
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What is Consolidation of Student Loan Debt?
Student Loan Debt Consolidation, means converging the money borrowed by the student (termed as Debt) from various banks in one single loan with a fixed single rate of interest. The Banks, the students choose help to consolidate multiple student loans and thus refinance them into a single student loan. This helps the students as they have to pay a lower monthly payment with a reduced rate of interest with extended repayment tenure. A Consolidation of Student Loan thus, allows the students to combine multiple education loans into one homogenous loan. The result is that the student now pays a single monthly payment to one bank instead of multiple payments to various banks.
How should I consolidate my Loan?
A student must first, carefully consider whether the loan consolidation is a better option for them rather than paying multiple loans. Loan consolidation guarantees to simplify loan repayment by centralizing the student’s loans to one combined bill and thus can lower monthly payments by the students by availing the student a much extended time period to repay their loan The bank may even be lenient in offering the student an even more easier plan to repay their debt.
However, a slight drawback is that, increasing the length of the repayment period makes the student do more payments and pay more number of rates of interest. Hence, a student must first be very sure because once the student’s loans are combined into a Consolidation Loan; they cannot be removed or undone. This is because; the loans that were consolidated are paid off and no longer exist for the bank to accelerate them again.
To consolidate a Loan:
· A student must first gather all the necessary details of the loans and banks that have been providing the student with the money as the details would be needed to consolidate these loans in one loan.
· A student must be very sure of the bank she/he chooses for the Consolidation of Student Loan Debt.
· A student must choose the deal that suits her/his monetary condition the best.
· A student must also, ask the bank for all the necessary details and make sure they do not charge more than required or the market rate.
· A student must thus compare the rates of interest with the available market rates of the Bank she/he chooses.
· She/he must for themselves calculate the rate of interest that would be levied and the number of payments that come out before making a confirmation.
· Once the student is done signing the deal for consolidation, she/he must keep all the details checked and handy.
What are the benefits of Consolidation of Loan?
· Lower interest rate: This means, consolidation helps in relieving the interest rate as the student is now liable for only one payment.
· Change the variable interest rate loan to a fixed-rate loan: The payment for the loan now remains fixed. It does not vary and that the student no longer has to juggle with the various payments.
· Lowers monthly payments: One payment obviously means, lesser amount to be paid in a longer time period.
· Anticipation about earning more: Some consolidation schemes tend to offer flexible repayment terms. These include plans that base the student’s monthly payments on their current pursued income, and plans where the payments gradually increase over a period of time as per the need of the student.
Consolidating with the Federal Government?
One offer that the students are offered is that of consolidating with the federal government, consolidating loans meaning combining their multiple federal student loans into one new federal loan, which is called a Direct Consolidation Loan. However it is considered that consolidating with Federal System does not give the student enough flexibility to choose from. A student cannot combine loans under the Federal Government in case the loans have been earlier granted by a private enterprise. Thus, the Federal Government does not cater much to the needs of the students but follows its set rigid base for consolidation. However, the rates of interest are low and hence if the student is well suited to them, she/he must prefer and undoubtedly go in for it.
When do the students begin with repayment?
Repayment of a Direct Consolidation Loan completely depends on the bank that student chooses. It can begin 60 days after the loan is disbursed, or could start even sooner. However, the students must not worry as the loan service provider will let them know when the first payment is due. The banks come with systems handy to notify the students about the payment on time. The repayment term might range from 10 to 30 years, depending on the amount of the consolidation of the loan and the repayment plan that the student has opted for.
How to know if the Bank chosen is the Best?
If the bank offers the student with the best of the deal, tailor made to suit the needs of the student then it is but natural that the bank that has been chosen is the best. But, the bank services are best known for the customer services they provide to their customers. Thus, while negotiating the student must keep in mind that the bank should be efficient, trustworthy and that their services are active. The customer team must have full knowledge and must be able to answer the student’s queries well. The Bank must maintain its charts but also be flexible enough to cater to the need of the student as its valued customer.