Federal Student Loan Consolidation


Essential Guide to Federal Student Loan Consolidation

Before you decide to consolidate all of your existing loans, you should consider several factors in determining if this is the ideal option for you. Basically, federal student loan consolidation can simplify the process of loan repayment because you can centralize all of your loans to one bill. Moreover, consolidating loans can reduce your monthly payments since you may be given a maximum of 30 years to pay off your loans. It is also possible for you to have an access to alternative payment schemes or switch from variable to fixed interest rate loan.

Is Federal Student Loan Consolidation Suitable for You?

Although federal loan student consolidation may offer numerous benefits, the extension in your repayment period means you will have to make more loan payments. In addition, you are likely to pay a higher interest rate. With this in mind, you should compare your existing monthly payments to the possible amount you need to pay when you consolidate loans.

Federal Student Loan Consolidation

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For instance, you will lose borrower benefits that are offered with original loans. These benefits include principal rebates, interest rate discounts and other loan cancellation incentives that can reduce the amount for loan repayment. When your debts are combined into a direct consolidation loan, they may no longer be removed. Loans that are consolidated are already paid off, and they no longer exist. You should take some time to analyze the benefits and drawbacks of consolidating before you decide to submit your application.

Which Loans are Eligible for Consolidation?

Several federal student loans may be consolidated such as direct PLUS loans, subsidized and unsubsidized federal Stafford loans, direct subsidized and unsubsidized loans, supplemental loans for students, PLUS loans from the FFEL or Federal Family Education Loan, and federal Perkins loans. You may also contact the Direct Loan Consolidation Center for a complete listing of loans that are eligible for consolidation.

Essential Requirements in Loan Consolidation

If you wish to qualify for direct consolidation loan, you should meet certain requirements including the following:

1. You must have one FFEL program or direct loan that is in repayment or within the grace period.

2. When consolidating a defaulted loan, you should agree to repay your new loans under the income-based or income-contingent payment scheme.

3. There are circumstances that you may be qualified to consolidate your existing FFEL consolidation loan even without additional loans.

Applying for Federal Student Loan Consolidation

You can find a number of ways to apply for loan consolidation. For instance, you may online, over the phone, or download the application form and promissory note by checking the Direct Consolidation Loan official website for more information.

If you are still unsure about consolidating loans, you may consider the following tips in deciding if this is the perfect option for you.

1. Initially, you should assess your existing federal student loans. You may check your loan account online, review the documents and consult your loan services or lender.

2. It is also important that you identify your current loan payment amounts by checking with your loan services or evaluating the documents in your loan account. By doing so, you can determine how much you have been spending to pay off your loans.

3. Determine the possible monthly payment you need to make when you consolidate. You may contact the Direct Loan Consolidation Center or use the online loan consolidation calculator. Then, obtain the weighted interest rate and assess your potential savings if you apply for loan consolidation.

4. After determining the amount you are likely to pay if you consolidated, analyze loan consolidation will reduce your monthly bill payments. Moreover, understand the length of time in repaying the loan, including the interest rates that may be charged to you.

5. While loan consolidation may reduce the amount for your monthly payment, you should still determine your current income situation, financial ability and budget. You may also consider other options such as forbearance or deferment for short-term payment relief.

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Bottom Line

Federal student loan consolidation can help you reduce your monthly payments by extending the loan repayment period. It also enables you to choose from other payment schedules that are suitable to your needs and budget. However, make sure that you determine several factors before deciding to consolidate your loans. This way, you can be certain that you will gain maximum benefits and avoid financial concerns in paying off your debts.


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