Finding the Best Stafford Loan Consolidation Programs
Comparison Shop for Best Deals
As you may or may not know, there are two versions of Stafford Loans: subsidized and unsubsidized. These are funded through the government’s Direct Loan Program and the Federal Family Education Loan (FFEL) Program lenders. It is possible to receive both types of loans, and many students receive both. This makes the Stafford Loans the most widely distributed student loan. One key component of the FFEL program is the Consolidation Loan. What this does, is it allows you to bundle all of your monthly loan payments into just one payment. This makes paying back all of your loans easy and affordable.
Demand for Federal Loan Consolidation
Student loan consolidation has been picking up steam recently. Many borrowers would not be able to attend college if not for student loans. An unfortunate consequence is that they may take on too much debt to pay back after graduation. Lenders don’t like what this consequence means: defaulting on student loans. In these situations, the granter won’t get their money back. To combat this problem, many have set up these consolidation loans.
Rules of a Stafford Loan Consolidation
If you do decide that loan consolidation is best for you, the following points are a few things you need to be aware of. As these are federally mandated rules, no private lender can change how Stafford Loans are to be repaid.
- The interest rates on federal loan consolidation are fixed per the federal government. The federal interest rate that you will pay is calculated by taking the interest rate attached to your federal loans, and weighting it with the interest rates of the time. This weighted average is rounded up to the nearest one-eighth of a percent and is capped at 8.25%.
- If you consolidate during your six-month grace period after graduation, you may qualify for a lower interest rate before repayment starts.
- Federal loans are not eligible for consolidation while in school.
- There is no credit check required when consolidating your loans. So, if you have loans, it doesn’t matter what your credit rating is.
- This may just be the best part: there are no fees for early repayment of your federal consolidation loans.
Consolidate Your Stafford Loans with the Direct Consolidation Loan Program
If you have one Federal loan- like the Stafford- plus an additional loan from some other organization, you may qualify for the government’s Direct Consolidation Loan program. Here are some things that you need to take into consideration before you decide you want to consolidate your loans:
- How far along are you in your payment process? Are you still in the grace period?
- How many more payments are you going to need to make?
- What is your interest rate, and is it variable?
- Are you finding it difficult to manage your payments each month?
- How many federal loans do you have?
- Are you willing to pay more in the long run in exchange for lower monthly payments? This could help save you from default.
One of the worst things you can do when repaying your loans is… well, not repaying them! This is called “defaulting on your loans.” When you go over 270 (almost nine months) without making a payment you have basically declared default. Under some circumstances, you may be allowed to consolidate a defaulted loan through the direct consolidation loan program. This usually requires that you have already made a certain number of previous payments. Most FFEL lenders will not consolidate a defaulted loan, however.
FFELP Consolidation—Be a Good Comparison Shopper
When you are looking to consolidate your Federal Stafford Loans, you need to be a comparison shopper. Don’t settle with the first lender who is willing to consolidate your loans. Often they quote you rates that are slightly higher than usually in order to make a little more money. Sometimes, if you go to multiple lenders, one might offer an incentive for you to use their company. if you go through an FFEL lender the first thing you should do is consult with an Account Manager. These managers are the ones who have instant access to your loan account, payment history and account balance. They will help you compare and find the best borrower benefits that lenders offer. The Account Manger will save you the hassle of finding every deal on your own.
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