Federal Consolidation Student Loan is a program under which students are allowed to consolidate their different loans into one single debt.
This will facilitate their ability to get their monthly payments reduced with an extension of terms. Consolidation loans, unlike other loans, have a fixed rate of interest for the whole life term of the loan ranging from 10-30 years.
Students are eligible for two types of student loan consolidation.
(1) Federal Direct Student Loan Program offered through Department of Education and
(2) Federal Family Education Loan Program offered by the government through private lending companies. However, students are eligible for consolidation of their loans only once they have either graduated or left.
A student is eligible for loan consolidation when:
1. He or she is no longer enrolled in school (being enrolled less than half-time)
2. He or she must be in the “grace period” of the loan or must be making the loan repayment regularly.
3. A typical loan amount of $ 10,000 is required
How to Apply?
Gather all information by searching online.
1. Have ready the application, Promissory Note, Introductory letter & instructions
2. Apply online and E-sign your Promissory Note.
3. Print, sign and mail your Promissory Note
4. Retrieve an In-Progress Saved Application (not submitted)
Disadvantages of Consolidating Your Student Loans:
1. On taking an extended payment plan through this loan consolidation, you have to pay more interest in the long run which cost a lot of money and a negative impact on your financial future.
2. The rate of interest will be higher on loan consolidation when compared to other loans.
3. Consolidation may not be worth it if you already paid-off a big part of the loan.
Benefits of Consolidating your Student Loans:
Consolidating multiple federal student loans into a single loan has so many benefits; some of which are:
1. Students can manage their debt easier by being responsible to a single lender and a single monthly payment.-this helps them to keep proper records and maintenance more effectively.
2. Students can choose their own payment options i.e. repayment plan such as standard, graduated, extended, Income Contingent, etc.
3. There is no fee for loan consolidation nor any minimum amount of students required for qualification.
4. Students who consolidate their loans can have extended deferment options even after exhausting these options before.
5. Lower monthly payments
6. Students can obtain subsidies on their student loans.
Federal Consolidation Student Loan is a relief to students who are fed up dealing with so many lenders and will help them to concentrate more on their studies.
Lowering monthly payments with extended loan terms will help them to keep control of their finance. All in all, opting for such a loan consolidation is definitely a bright idea for each and every student who wants to pursue his studies at a higher level.