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[F141]Federal Consolidation Loans Student

by John Doyle, Joh

Apart from the private financial institutions, there is another type of loan consolidation program that debtors with multiple loans can opt for, and this is offered by the U.S. federal government.

The federal consolidation loans that are the easiest to obtain are those loan programs for students, which makes a lot of sense. After all, students and recently graduated students are the ones that need a lot of help when it comes to finances. With little or no source of income, they actually have to pay the whole gamut of student loans, medical bills and credit card debts. The U.S. Department of Education thankfully has loan programs in place that consolidate all federal education loans and allows students to pay for these loans through a single monthly payment.

If you have multiple education loans, then thanks to the Higher Education Act, you actually have the right to consolidate your loans. This act created federal consolidation loans under the Direct Loan program and the FFEL, or Federal Family Education Loan program.

Under federal consolidation loan programs, as their name implies, only federal loans qualify for consolidation. In order to get a Direct Consolidation Loan, one must already have at least one federal education loan through the FFEL or Direct Loan programs. In addition, the status of the loans must be either that they are still in their grace period, or they must be in deferment or in default.

You can get more details about federal consolidation from Federal Student Aid, which is part of the United States Department of Education. In addition to FFEL loans, there is another type of loan, which is the CBSL loan. These two loan types encompass a wide variety of loans, such as Federal Parent PLUS Loans, Federal Direct Loans, Federal Direct Grad PLUS Loans, Subsidized Loans For Students(SLS), and Federal Stafford Loans both subsidized and unsubsidized, as well as Health Professions Student Loans, Federal Nursing Loans, Federally Insured Student Loans, and Federal Perkins Loans.

FFEL and CBSL loans can not be consolidated together and must be managed through two separate consolidation programs, each geared toward one type of loan or the other. Regardless, federal consolidation loans can greatly reduce the amount of money you pay monthly, perhaps up to 40%. The repayment term of these loans is anywhere from 10-30 years.

If your loans consist of both private and federal student loans, it is definitely the wisest choice to make the federal loans your top priority. Loans that were granted by the United States Department of Education can have effects on your financial state long after you have graduated. With these loans, if you default, the federal government can deduct up to 15% of your gross pay to help recover the debt, as well as taking 100% of your ta returns until the debt is repaid.

Having several federal loans at once need not stress you out. The federal government has actually provided for a solution to this stressful situation through its federal consolidation loans. Keep in mind though, that federal consolidation loans are still debts that need to be paid.

For American students, the U.S. Government came up with a plan that can help a student manage their student loan debt. The plan they came up with is called a Federal Direct Consolidation Loan. It does not matter if you are a recent graduate student, well into your career already, still at school, or in your grace period for repayment of a student loan. For any of those student categories, a Federal debt consolidation loan may be applied for.

Students successful in their application for a federal debt consolidation loan may reduce the amount they need to repay each month, or increase the time that they have to pay off their current debt.

How Does a Federal Debt Consolidation Loan Help a Student Pay Off Their Debt?

For a student who has student loans under several different programs, bringing them all together under one direct Federal Debt Consolidation Loan can make your debts easier to manage. By combining all of your loans into one, you're only responsible for making one payment to one lender - the U.S. Government. To help make the option of debt consolidation more attractive, there are four flexible payment plans available, including two that which take income and/or income expectations into account.

The Federal Debt Consolidation Loan is Available to Help you Manage your Student Debt.

Student loan debt is not something that you want dragging at your feet like a ball and chain. It provides a good opportunity for students to learn to manage their finances. Even if you are still at school, it is a good time to learn to manage your debt. That will hold you in good stead as a consumer long into the future. For example, if you choose to consolidate all your student debts into one before you leave school, you can lock in an interest rate that as much as .6% lower than if you attempt to refinance later, after you have left and are no longer a student.

For more how a Federal Direct Consolidation Loan can help lower your repayments, and manage your student debt, you can visit the Department of Education's web site. Once there, you can make use of their online debt calculator at https://loanconsolidation.ed.gov to estimate your projected monthly payment under the various plans.

Can a Federal Direct Consolidation Loan help you manage your debt?

There could be reasons why debt consolidation is not the best solution for any particular student. If a student is close to the end of their repayment term, for example, it may not be worth the work to consolidate. Prolonging the life of your loan is likely to increase the amount you pay overall. If you can afford the higher monthly payments to pay off the debt sooner, you can ultimately save money by doing so.

If, however, you are sure that a Federal Direct Consolidation Loan will be to your benefit, you still need to be eligible for the program. The eligibility guidelines can be found at loanconsolidation.ed.gove/borrower/beligible.html In addition, the list of loans that are eligible for consolidation can be viewed at: loanconsolidation.ed.gov.borrower/bloans.html

Which Federal Student Loan Consolidation Plan is the most suitable for you?

Here are the 4 consolidation loan consolidation plans that are available to choose from:

Standard: The standard repayment plan is fixed-rate, and runs for a maximum of 10 years. The minimum monthly payment is $50.

Extended Repayment Plan: this is a fixed rate plan, with payments extending over the course of 12-30 years. Payments are a minimum of $50, and the life of the loan is dependent on the total amount of the debt.

Graduated Repayment Plan: Under the graduated plan, payments start low and increase, generally every two years. The length of the repayment period can vary from 12 right up to 30 years.

Income Contingent Repayment Plan: The monthly payment is based on a borrower's annual adjusted gross income, family size and the total amount of direct loans.

If your student loan debt is out of control, or could be better managed, it is worth paying a visit to: https://loanconsolidation.ed.gov to see how the federal government can help you with a debt consolidation loan for students.

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