Consolidating Your Government Student Loans
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.
For Part II of this article please visit:
http://www.american-lenders.org/goverment_student_loan
