Information on Federal Consolidation Choices
How Direct and FFELP Consolidation Loans Can Help
If you’re a college student you probably have federal student loans, maybe subsidized and unsubsidized Stafford Loans, maybe even a Perkins Loan. If you’re a grad student you may also add in a PLUS Loan for Graduate Students. By the time you graduate and make it through your six-month grace period you are slammed with a variety of monthly loan payments. Maybe you can manage them at first, but what happens if you get behind by a month or make consistent late payments because you’re living paycheck to paycheck? What then? Are you really going to choose loan default over another more practical option?
Find out how use a Federal Consolidation Loan as a very practical and wise financial solution to your student loan debt.
Federal Student Loan Programs
Federal student loans are available through two programs: the Direct Loan Program and the Federal Family Education Loan Program (FFELP). Loans include: subsidized and unsubsidized Stafford Loans, Perkins Loans, PLUS Loans for Parents and Graduates, and the federal consolidation loans.
If you have multiple lenders to whom you make monthly payments and have consistent difficulties meeting payments you might benefit from consolidation. Right now take our quick consolidation self-assessment quiz. Determine whether you are a candidate for a federal consolidation loan.
Applying for a Federal Consolidation Loan
Consolidate your Direct Loans through the Direct Consolidation Loan program. The Federal Family Education Loan Program (FFELP) includes a loan consolidation option, as well. Guess what? Even if you have multiple lenders you may consolidate your FFELP loans with one lender.
Apply for most consolidation loans with an online application. You’ll need to have your current loan information, including account numbers, pay offs, and lenders.
If you have done any damage to your credit history, don’t worry, bad credit or no credit: federal consolidation loans are no credit check loans, same as your federal loans, they are part of the guaranteed loan program through the federal government.
Repaying Your Federal Consolidation Loans
Shop carefully among consolidation lenders. Borrower benefits vary widely and many lenders have eliminated perks. Some may only have limited repayment options. Traditionally these are the four loan repayment plans from which you’d choose:
- Standard repayment features monthly-fixed payments for the life of the loan.
- Extended repayment is available to borrowers with a high level of debt. The life of the loan may be extended, thereby lowering the monthly payments even more.
- Graduated repayment features low monthly payments that gradually increase. For borrowers that anticipate income to increase significantly over time this may prove a viable option.
- Income sensitive repayment combines the benefits of an extended plan with one that figures payments based on your income.
Federal Consolidation Rates and Rules
Here are a few “rules” you should know about the federal consolidation loans:
- Federal consolidation loan interest rates are fixed across the board. There is a specific equation by which federal consolidation interest rates are determined, that includes a “weighted average interest rate.”
- Subsidized and unsubsidized Stafford, Perkins Loans, Nursing Loans and Health Education Assistance loans may be consolidated only after graduation.
- Married borrowers may not combine their loans for consolidation.
- Students must be graduated to be eligible for federal consolidation loans.
Find out what your loan payment will be once you’ve consolidated all your federal loans and applied the interest rate calculation. Use the loan consolidation calculator available on the Federal Direct Consolidation Loan website. Feel good about what you’ll be saving each month.