Put simply, it is the process of uniting all of a borrower’s loans into one loan. Student loan consolidation programs exist for both federal student loans and private student loans, and many borrowers have found that student loan consolidation has removed the burden of having multiple lenders, all with varying loan balances, interest rates, monthly payments, and terms.
Through the process of student loan consolidation, the borrower only has one loan and is only required to make one monthly payment, with only one interest rate and term. This situation makes the repayment of loans much simpler and more manageable. The risk of defaulting is considerably lessened when a borrower consolidates their loans.
For the most part, federal loans are more beneficial than private loans. Ideally, borrowers should take a look at their federal loan options before taking out a private loan, especially since federal student loan consolidation programs are much easier to qualify for. They do not have such rigid requirements. For example, they do not require a credit check, and they are available to borrowers even if they are in default on their loans.
However, some borrowers find that private consolidations serve them best, and this is reasonable. In certain situations private consolidations are the greater option and can still be highly beneficial to is available for those borrowers who have federal student loans and are not currently attending school. This program is beneficial and does not have a lot of rigid qualifying standards, so most borrowers with federal student loans find it helpful.
For more information on federal student loan consolidations, please review the information we have compiled or get in touch with us. Private Consolidation Many private institutions offer private consolidations, which are another possibility for borrowers.
Understanding Student Loan Consolidation
Student loan consolidation refers to the process of merging multiple federal education loans into one loan. It is also known as Direct Consolidation Loan. Under this program, the student will be entitled to pay a single monthly loan payment as compared to multiple payments.
Factors to consider before consolidating your student loans
It is always advisable to weigh the alternatives before making a decision. But what are the benefits of consolidating your student loan? Student loan consolidation enables you to have a centralized loan repayment point where you can make all the repayments.
A Consolidated loan enables you to make lower affordable monthly payments with a repayment period of up to 30 years. You can even have the advantage of alternative repayment plans that you could not have enjoyed with multiple loans. Students who choose to consolidate their federal education loans are given the opportunity to have a fixed interest rate option rather than variable interest rates.
On the other hand, note that you will not be entitled to any other benefits that accrued your original loans if you choose to consolidate. Some of the benefits that you will have to forego include; interest rates discounts, principal rebates among others.
It is important to note that when you combine your multiple federal education loans onto a Direct Consolidation Loan, it cannot be reversed.
List of loans that can be consolidated
The following federal student loans can be consolidated;
- Subsidized Federal Stafford Loans
- Unsubsidized Federal Stafford Loans
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Federal Perkins Loans
- Federal Nursing Loans
- Health Education Assistance Loans
- Supplemental Loans for Students (SLS)
- Direct PLUS Loans
- PLUS loans from the Federal Family Education Loan (FFEL) Program
A Direct Consolidation Loan does not include any private education loan. In case, you have previously defaulted other loans, and then you will be required to meet certain minimum standards to qualify.
It’s also worth noting that any PLUS Loan made to the guardian/parent of a dependent student cannot be shifted to the student through consolidation. You need not include any PLUS loan your parents took out for the dependent student’s education when seeking to consolidate your loan.
When are you eligible to consolidate your loans?
A student is eligible to consolidate his/her federal education loan in the below circumstances;
- After graduation
- After leaving the school
- If you drop below half-time enrollment period
Consolidation Loan Interest Rates;
The benefit of consolidating your federal education loans is that a Direct Consolidation Loan charges a fixed interest rate up to loan maturity time. The weighted average method is used to determine your interest rate, and it is rounded up to the nearest one-eighth in every 1%. The other benefit is that Direct Consolidation Loan interest rate is not subjected to a cap.
When should you start your repayment process?
When your loan is disbursed, you have the opportunity to start your repayment process after 60 days or less. Make sure to consult your loan servicer to get a clear guideline on when to start. The loan has a maturity period of 10-30 years based on a number of factors such as; the loan amount, other education debt loan amount, and your preferred repayment plan.
How to contact Consolidation servicers
There are different methods that you can use to get assistance either when applying or after submission of your application. The Direct Consolidation Loan has a contact center that helps you get any information regarding loan consolidation prior to loan application.
You can contact us at 1-888-909-6290.
Questions regarding technical assistance can be answered by clicking the “Contact Us” tab.