Student Loan Consolidation Costs

Written by Nicole Madison
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Usually there are no fees involved when you apply to consolidate your federal student loans. The application is free and, in most cases, no credit check is required. Despite the fact that the application is free, there may be student loan consolidation costs involved. These costs are related to guarantee and origination fees.

Examining Student Loan Consolidation Costs

The Higher Education Act permits loan guarantors to charge a fee equal to up to one percent of the borrowers total requested loan amount. This fee is used to help guarantors pay claims on defaulted loans. This fee is typically added to the total consolidation loan balance. Some guarantors choose to waive this fee.

Another fee that adds to student loan consolidation costs is the loan origination fee. This fee is paid to the borrower to the lender to cover administrative fees for the consolidation loan. The origination fee is typically deducted from each loan disbursement. Lenders may, at their discretion, choose to lower or eliminate this fee.

Loan consolidation is presented as a good way to reduce student loan payments as well as, at times of extremely low interest rates, overall loan costs. However, when you are considering student loan consolidation costs keep in mind the fact that extending your payments will often increase the overall cost of your loan.

Consolidation may be beneficial to you if you are interested in lowering your monthly payments and locking in fixed interest rates. This is a benefit that can be invaluable if you are just out of college and struggling to make your payments.

The Higher Education Act permits loan guarantors to charge a fee equal to up to one percent of the borrowers total requested loan amount. This fee is used to create a federal reserve from which guarantors can draw money to pay claims on defaulted loans. This fee is typically added to the total consolidation loan balance. Some guarantors choose to waive this fee.

Another fee that adds to student loan consolidation costs is the loan origination fee. This fee is paid by the borrower to the lender to cover administrative fees for the consolidation loan. The origination fee is typically deducted from each loan disbursement. Lenders may, at their discretion, choose to lower or eliminate this fee.

Loan consolidation is presented as a good way to reduce student loan payments as well as, at times of extremely low interest rates, overall loan costs. However, when you are considering student loan consolidation costs keep in mind the fact that extending your payments will often increase the overall cost of your loan. Ask your lender to waive non-essential fees to help keep loan consolidation costs low.


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