Consolidating Your Government Student Loans
Posted in student loan information by: admin
A Consolidation Loan allows you to combine your federal student
loans into a single loan with one monthly payment, which can be
significantly lower than the payment required under the standard
10-year repayment option. Under the Federal Family Education
Loan (FFEL) Program, banks, secondary markets, credit unions,
and other lenders provide the Consolidation Loans. Under the
William D. Ford Federal Direct Loan (Direct Loan) Program, the
federal government provides the loans.
Most federal education loans are eligible for consolidation,
including subsidized and unsubsidized Direct and FFEL Stafford
Loans, SLS, Federal Perkins Loans, Federal Nursing Loans, and
Health Education Assistance Loans. Private education loans are
not eligible. PLUS Loan borrowers (parent borrowers) also can
consolidate their loans.
To apply for a Direct Loan Consolidation or an FFEL
Consolidation the borrower must contact the lender and complete
an application. Most lenders provide borrowers with the ability
to apply on-line or request an application over the telephone.
Once an application is completed and submitted, the lender will
request information from the borrower’s other lenders or from
its own system to determine the amounts outstanding on the
borrowers loans. The borrower will then receive notification
about the consolidation loan, normal consumer disclosures, the
amount owed, and if appropriate, where to make payments.
Always Consider the Cost
You should keep in mind that although consolidation can simplify
loan repayment and lower your monthly payment, it also can
significantly increase the total cost of repaying your loans.
Consolidation offers lower monthly payments by giving borrowers
up to 30 years to repay their loans. So, you’ll make more
payments and pay more in interest. In fact, in some situations
consolidation can double your total interest expense. If you
don’t need monthly payment relief, you should compare the cost
of repaying your unconsolidated loans against the cost of
repaying a consolidation loan. You also should take into account
the impact of losing any borrower benefits offered under
non-consolidated repayment plans. Borrower benefits, which may
include interest rate discounts, principal rebates, or some loan
cancellation benefits can significantly reduce the cost of
repaying your loans.
November 13th, 2008 at 8:32 am
1) what federal government organizations consolidate student loans?
Also, do any of these organizations consolidate private loans?
November 13th, 2008 at 1:34 pm
Sallie Mae (Student Loan Marketing Association) offers loan consolidation, as do any number of lenders. I would stay away from big banks like Citi, Bank of America, Chase, etc that offer consolidation. Stay with an outfit that only deal in student loan paper.
There are no "federal government organizations" per se that consolidate or make loans. The lenders that do are authorized by the feds, but are not government agencies in and of themselves. There are some state-run organizations, like the Ohio Student Loan Commission, Kentucky Higher Education Commission, etc. But nothing federal. The feds simply guarantee the loan; that's all.
When you consolidate, be wise about what your getting into. There are a lot of offers out there to REDUCE YOUR PAYMENT BY 75%!!! for example. But what this does is extend the payment period to 25 and 30 years, thus making the actually repayment amount up to ten times what you actually borrowed. So be careful.
Don't sign anything until you see the Truth In Lending statement which spells out the real deal. If you are confused, ask your banker or a knowledgeable friend or parent to look it over and help you make a good decision.
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