Federal student loan consolidation

Student Loan Consolidation in the FFELP (Federal Family Education Loan Program) is designed to help students pay their Federally Backed student loans. There are many benefits to consolidating in the FFELP program.

1. Fixed Interest Rate
2. Lower Monthly Payments
3. No Pre-Payment Penalties
4. Retain all your federal rights such as Deferment and Forbearance
5. Subsidized portions remain subsidized even after consolidating
6. Forgiveness rights for Stafford Loans are retained.

There is no downside to consolidating your loans. Even though the program increases the repayment term from the standard 10 year term to 15, 20, 25, or 30 years depending on your loan balance. But, your right to repay without pre-payment penalties makes the point moot.

Maximum repayment terms are as follows:

$10,000 - $19,999 (15 years)

$20K - $39,999 (20 years)

$40k - $59,999 (25 years)

$60K + (30 years)

Ultimately the FFELP consolidation program provides you with financial freedom and flexibility. Additionally, there is a space on the application where you can set your own repayment term up to the maximum term for your loan balance. Students should typically consolidate their loans after every time they switch schools, between any breaks (summer break not included), and whenever enrolled less than 6 credits. They should also consolidate while in their grace period to take advantage of the .6 in school/in grace reduction in interest rate. Most consolidation companies can save your entire grace period by holding the application until right before your grace period end date. Make sure you mention your grace period to the people you are consolidating with. New legislation passed in June 2006 has also made it possible for students who only have a single lender to benefit from consolidating. These students will also benefit from a fixed interest rate even though it's not a consolidation in the true sense of the word. Also, in July of 2006 new Stafford Loans were issued at a fixed rate of 6.8% and Parent Plus Loans at 7.9%. Purkins Loans are always issued at 5.0%. Students with Stafford Loans and Parent Plus Loans prior to July 2006 had variable rates. The rates were reset from 5.375% to 7.14% for Stafford Loans and from 6.1% to 7.94% for Parent Plus Loans.

The interest rate for a FFELP Consolidation loan is derived by taking the weighted average rounded up to the nearest 1/8 of a percent. A consolidation of variable rate Stafford loans will typically lock you in at 6.625% (in grace) or 7.25% (out of grace). Some companies offer a 1/4 rate reduction for signing up for automatic check debit and an additional rate reduction for maintaining on-time payments for a specified amount of time.

A little more on weighted average:

Definition: An average that takes into account the proportional relevance of each component rather than treating each component equally.

Suppose you had these loans

$2,000 @ 4%

$5,000 @ 1%

$3,000 @ 10%

A standard average puts you at 5%.

Weighted average:

($2,000 x 4%) = 80

($5,000 x 1%) = 50

($3,000 x 10%) = 300

80 + 50 + 300 = 430/$10,000 = 4.3%

As you can see the $5,000 at 1% weighs more heavily on the interest rate than the other two loans. If you had a consolidation set for the exact same amount of time as the original loans you would pay EXACTLY the same amount of money if a weighted average was used.

Consolidate your loans, it could only help you. If you get a call from a consolidation company make sure they are in the federal program and can provide you with a registered number with the US Department of Education.

Consolidation of College Loan Debt

Most youngsters, the students in the United States desire to become independent early in life. To help them in their endeavor, several financing institutions have come forward with attractive schemes to avail them of a loan for their college education. These institutions also provide flexible repayment options. Unfortunately, it is not guaranteed that students always get a good career start and are able to pay off the loans taken during college days, once their education is complete. Some students also do several courses together hence requiring multiple loans, resulting in them having to repay more than one loan. However, there being a rising inflation rate, expenses soar and hence a student’s budget also gets disrupted. These thus call for a need for a debt consolidation loan to help in easing the debt burden. The loan consolidation method is not meant only for students with high paying jobs. Even students with low paying jobs have hope in form of the loan consolidation methods. In this case, the consolidation company gets in touch with the student’s previous lenders and strikes a deal with them, which work out in both parties’ best interest. What is debt consolidation? Debt consolidation loans is essentially a term used where, all the loans taken in the past are combined together into one solitary loan and a single monthly payment amount is worked out, which is payable over a period of time. The Debt consolidation loan lead to the total interest and consolidated loan amount being greater than earlier loan repayment amounts. When this is done, it does not affect the budget because; usually a period of 20 to 30 years is sufficient to repay the loan.

All that you need to do to avail of the services of loan consolidation is hire a loan consolidating company and leave it to them to figure out a repayment strategy with lower rates, as compared to all your earlier interest rates. This eases your debt burden as well as formulates a term plan, which allows you to save money and repay the loan. With this debt consolidation loan, as the finances of the student increases as a result of getting a better employment in the long run, the student can increase his or her monthly loan payments. The student does not have to give any fee to the loan consolidation company so as to access it's services. Each loan consolidation company has its own way of evaluating the eligibility based on its policies. The student should approach the loan consolidation company after their on evaluation.

The student should have the following at hand because the loan consolidation company will need them:

1. Documentary proof such as college mark sheets, Student Identification Card and number.
2. List of earlier loans complete with interest rates and term periods.
3. Personal details such as date of birth, address proof
4. Whether you are supported by family or not.
5. Other relevant information.

The College loan consolidation is also available for a student who has not yet completed his education. College loans prove to be very helpful to the student. Students can also use the money to help them with hidden costs like books, fees, traveling home, or even supplies. So consolidate your college loan now.