Student Debt Consolidation Loans, Overview and Tips
A student debt consolidation loans allows you to combine your federal student loans into a single loan with one monthly payment. The repayments of a student loan debt consolidation loan 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 student debt consolidation loan.
Most federal education loans are eligible for inclusion in a student debt consolidation loan, including subsidized and unsubsidized Direct and FFEL Stafford Loans, SLS, Federal Perkins Loans, Federal Nursing Loans, and Health Education Help Loans. But, private education loans are not eligible for inclusion in a student debt consolidation loan.
To find out which loans can be included in a student debt consolidation loan contact the Direct Loan Origination Center’s Consolidation Department if you’re applying for a direct student debt consolidation loan. Contact a participating FFEL lender if you’re applying for a FFEL student debt consolidation loan.
It is worth noting that you are still eligible for a student debt consolidation loan after you graduate, leave school, or drop below half-time enrollment. You can also get a student debt consolidation loan while you’re in school.
You must, but, be attending at least half time and have at least one Direct Loan or FFEL in an ‘in-school period’ which generally means that you have been continuously enrolled at least half time since the loan was disbursed.
There are a number of conditions that need to be met for you to qualify for a student debt consolidation loan, especially if you are delinquent or in default and your loan holder will be able to give you all the necessary information.
To go for debt consolidation of your student loans, your minimum balance should be $5,000, and you must either be in the six month grace period after your studies, or are already repaying your student loan.
Before selecting your student debt consolidation option, review all the advantages and the disadvantages:
- Through debt consolidation you make your student loan payments to a single lender.
- Depending on the balance of your loan amount, your consolidated student loan has an extended repayment term from 10 to 30 years.
- When negotiating with your bank or financial institutions, ensure that your phased repayment plot allows you to easily meet your monthly payments and have a excellent credit rating, at the same time.
- The rate of interest for student debt consolidation is capped at 8.25 percent for federal student loans.
- Once the rate is fixed you cannot take advantage if the interest rates fall in future.
- There are no fees charged for student loan debt consolidation.
- Once approved, you cannot undo your debt consolidation of your student loans as they have already repaid in full to your previous creditors, and they no longer exist.
If the same holder holds all the FFEL loans you want to consolidate, you must obtain the student debt consolidation loan from that holder, unless you haven’t been able to get a loan with income-sensitive repayment terms that are acceptable to you.
To be eligible for a William D. Ford direct student loan debt consolidation loan, you must have either a direct Stafford subsidized or unsubsidized loan that will be included in the student debt consolidation loan or have at least one Federal Family Education Loan (FFEL) program Stafford subsidized or unsubsidized loan.
You can still obtain debt consolidation for your over due, or unfulfilled, student loans if you negotiate a satisfactory repayment plot with your bank, or debt consolidation lender. Married couples, too, can consolidate their individual student loans together. This is regardless of how much each owns before consolidation, and must now agree to pay the consolidated amount.
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