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Not only does the federal government provide consolidation help, but so do many states. Most state consolidation programs are for current residents or students who attended a state funded school. Many states have their own programs set up by the state government. This government organization then usually creates a corporation used exclusively to manage college student funding and administration..
Benefits of State Student Loan Consolidation
As with private banks and organizations, states usually offer benefits that accrue over the course of repayment. An example would be getting an interest rate deduction by .25% if you use direct withdrawal to repay. State lenders reward on-time payments very well. Some programs drop your interest rate gradually up to a 2% discount after 36 or 48 months. Deferment options are also available in some states for qualified students. Click here to learn more about deferments.
A real example is The College Foundation of North Carolina. They offer a .25% reduction of the interest rate once automatic debit is set up. After 24 consecutive on-time payments, the interest rate drops by .5%. After 36 payments, it drops another .5%, and after 48 it drops another 1%. With this model, after 48 on-time payment with automatic debit, your interest rate will be dropped by a full 2.25%.
Types of Student Loans to Consolidate
As with most student loan consolidation programs, state programs will consolidate a variety of federal student loans including the most popular Stafford Loans, Perkins Loans, PLUS Loans, etc. If you received your original student loans all from the same source, then you are urged to consolidate with that lender first. In some rare cases, you may still be able to leave that one original lender in favor of a more competitive interest rate with a state program.
States without Their Own Programs
Companies such as United Student Aid Funds (USA Funds) provide assistance to states that do not have their own government created consolidation programs. USA Funds is the national guarantor of student loans and the designated guarantor for Alaska, Arizona, Hawaii, Indiana, Kansas, Maryland, Mississippi, Nevada and Wyoming.
In many cases your own state can provide the most attractive interest rate plan for your situation. Make sure not to skip this option in your search for the best consolidation interest rate. If you're confused about interest rates, then go here.
