Now that you are facing the stress of dealing with the repayment of your student loans, you may want to opt for consolidation. Student loans consolidating can be tricky, and several factors need to be taken into consideration when making your decisions. However, if you decide that the benefits of consolidation outweigh the drawbacks, you can find a way to make it work, whether you have federal or private loans.
There is a difference between consolidating federal and private loans. The most glaring difference is that, with a Federal Consolidation Loan, your interest rate is fixed in keeping with a federal formula, while private consolidation interest rates can be either fixed or variable. Variable means that the interest rate can increase at any moment. If you are consolidating both types of loans, you should make sure to keep them separate.
When Consolidating Federal Student Loans, the borrowers are generally allowed up to 10 years to repay, when they consolidate Federal Stafford and Graduate PLUS Loans. However, some borrowers can qualify for the government’s Extended Repayment Plan. Borrowers who consolidate student loans through the Federal Consolidation Loan Program can refinance one or multiple student loans into one new fixed-rate loan. In other words, the original loan is paid in full and another one is initiated.
Anyone with eligible Federal Student Loans can get a Federal Consolidation Loan, and can do so without paying loan fees. Interest rates are fixed for the life of the student loan. Rates are based on the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth-percent or 8.25 percent, whichever is less. Borrowers do not need a credit card, and the fixed interest rates allow them to avoid future variable rate increases.
You must meet certain eligibility requirements for student loans consolidation received from the federal government. To qualify, the borrower must have one or more appropriate Federal Student Loans with a combined balance greater than $10,000. The borrower also must have left school, graduated or must be attending school less than half the time.
Borrowers may have only one Federal Student Loan Consolidation application in process at a time, and the loans must be in good standing, not in default. The borrower’s loans must also be in a grace period, deferment, forbearance or repayment status at the time of application.
Eligible Federal Student Loans include:
- All Federal Stafford and Direct Loans
- Graduate PLUS Loans
- Federal Perkins Loans
- Health Professions Student Loans
- Nursing Student Loans
- Federal Supplemental Loans for Students
- Auxiliary Loans to Assist Students
- National Direct Student Loans
- Federally Insured Student Loans
- Federal Consolidation Loans