You have a single monthly payment. After consolidation, borrowers only have one lender, the Department of Education, making it much easier to manage the debt.
It may reduce your loan payment. The minimum payment amount of the consolidated loan may be less than the combined payments of your previous loans.
There is no minimum or maximum loan amount, and no fee for consolidation.
You may get new or renewed deferment options for your loans.
There are several different repayment options, with the ability to switch repayment plans at any time.
Loans may be consolidated in two ways - directly with the federal government using the U.S. Department of Education Direct Federal Loan Consolidation program, or through commercial lenders using the Federal Loan Consolidation program.
For students who have borrowed heavily, the Direct Federal Loan Consolidation program may be a good option. It includes a special income-contingent option that brings all obligations together into a single new consolidated loan with a monthly payment structure based on the borrower's income level. The lower your income level, the lower your payment. As your income rises, your loan payment amount will rise accordingly. The repayment period lasts until the loan is repaid, up to 25 years. After 25 years, the remaining amount of the loan is repaid by the federal government, with the borrower the subject of a tax liability for the amount repaid.
One negative of the Direct Federal Loan Consolidation program is that it results in the payment of much more interest because of the long repayment period. Therefore, this option is only recommended for students who are absolutely unable to make a normal payment.
The following types of loans qualify for inclusion in a Federal Consolidation Loan:
Subsidized, unsubsidized, and guaranteed Stafford loans;
Perkins or NDSL loans;
Supplemental loans for students;
PLUS loans;
Federal insured student loans; and
Health professional student loans.
To qualify for a Direct Consolidation Loan, you must have a Direct Loan or Federal Family Education Loan ("FFEL") that is in one of the following states: in grace, repayment, deferment, or default. If you are still in school, you cannot consolidate your loans.
Perkins loans by themselves cannot be included in a Direct Consolidation Loan - there must be non-Perkins loans as well. Perkins loans that are consolidated will be unsubsidized. It may not be advantageous to add Perkins loans to a Direct Consolidation Loan, however, because you will lose the special benefits that are attached to Perkins loans.
If your loans are in default state, they can still be consolidated if satisfactory arrangements are made with the lending institutions or you agree to repayment under the Income Contingent Repayment Plan. One thing to keep in mind is that, although loans in default can be consolidated, they will remain in a default status on your credit report. A better option is to rehabilitate the loan before consolidation. The status of the loan on your credit report will then be updated to reflect that it is current.
We've just scratched the surface of what there is to know about student loan consolidation. However, you should now see that there are many options when it comes to consolidating your loans. Consolidation can definitely make your life easier and is something you should consider if you are currently making payments on multiple student loans, including private student loans.
The rising costs of college tuition have made it almost a necessity to apply for a student loan today. Students not only have tuition costs, but the cost of books, meals, gas, cell phones, recreation, etc. The variety of student loans enables students to take care of their varying college expenses. A student loan however, is a loan that must be repaid under specified circumstances.
The first thing you need to consider is your credit rating or credit history. A poor credit history can adversely affect your student loan application. Some lenders will look at your credit history; some don't. It all depends on what kind of student loan you apply for. Thus, if you have a poor credit history, look into student loans that don't consider your credit report or credit score a top requirement.
Guaranteed Student Loans, also known as Stafford Loans have a low interest rate. A student can apply for a subsidized or unsubsidized student loan. A subsidized loan means the government pays the interest for you while you are in school. The subsidized student loan is based on the students financial need. An unsubsidized student loan means you will be charged interest while you are attending school. The principal must start being paid after you have finished school. Both types of student loans need to start repayment six months after the student has finished college.
The third thing you should consider when applying for a student loan is the interest rate of the loan. Find the lowest interest-bearing student loan you can find. If possible, apply for a subsidized student loan. With a subsidized student loan, you won't have to worry about the interest accruing while you are going to school
To summarize, consider your credit history, your ability to pay the loan back and the interest rate when you are applying for a student loan. If your student loan application gets approved, create a budget. Paying off your student loan every month should one of your priorities. If at all possible, avoid borrowing too much money.
Both Jerry Work & Sarah Parker are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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