When you need to consolidate a few student loans, you need a direct consolidation loan. This allows you to group all of your loans from school into a single loan with a solitary monthly payment. Before you consolidate your loans you need to make sure that this option is right for you.
Why Should You Consolidate Your Loans?
Consolidating loans can simplify your life by allowing you to repay several loans in one payment instead of pay each loan separately. This process can also help you lower your regular payments and give you thirty years to pay back the loans.If any of your loans are currently on variable interest rates you will also be able to switch them over to a fixed interest rate.
The only drawback is if you escalate the amount of time on your loans, you could oweadditional interest over time.In order to see if it is worth your effort, you need to compare your current payments that are made monthly to the amount you will pay if all of your student loans are consolidated.
Another consideration you want to keep in mind is any special borrower benefits you may have received on any of your other original student loans. Some of these benefits may include discounted interest rates, rebates for principal and even benefits regarding loan cancellation.If you consolidate any loans you could lose some of these benefits, so it is a good idea to keep this in mind.
When your student loans are consolidated together, you cannot remove them.When you consolidate any loans together, the company that handles the consolidation pays off the other lenders. Therefore, you cannot re-open them and pay them off. This is another good reason why you need to make sure loan consolidation is for you. Most of the time when you consolidate bills it is in your favor. The same is true for loans as long as you have considered whether you are going to lose any benefits or not.
Types of Loans Considered for Consolidation
Almost all Federal loans for students are applicable for consolidation. If you are wondering exactly which loans this may be, and if you have any of them, there is a list below.
Supplemental Loans for Students
Direct Plus Loans
Federal Nursing Loans
Subsidized Federal Stafford Loans
Direct Subsidized Loans
Unsubsidized Federal Stafford Loans
Health Education Assistance Loans
Federal Perkins Loans
Direct Unsubsidized Loans
Plus Loans from the Federal Family Education Loan Program
If you have a private education loan, then you will need to speak with that specific lender considering whether you have multiple private loans that need consolidating or not. Private loans for education cannot be lumped in with other loans for consolidation. Defaulted loans require specific requirements to be met in order to consolidate them.
If you have a loan that is in the name of a parent for a student that is dependent upon their parent then that loan will not be transferred for consolidation purposes. Any loans that were taken out by a family member for a student cannot lump that particular loan in for consolation. All the loans you consolidate must be in your name. You can consider loan consolidation after you have been enrolled in school half of the time of enrollment, graduate or leave school.
Requirements for Loan Consolidation
There are a few requirements you must consider before you can consolidate any of your student loans. The first being that you have to have one FFEL student loan is ready for repayment or in a grace period. If you have a loan that you have already defaulted on, you must make arrangements with the current lender to make payments and get it out of default before it can be considered for consolidation. In some cases, you can agree to pay the new consolidation loan when you pick fromtwo different plans, the Income Based Repayment or the Income Contingent Repayment plans.
You cannot combine a loan that has already been consolidated once unless you have another FFEL Program loan or a direct loan to go with it. There are some considerations for FFEL Consolidation Loans, speak with your lender to find out if any of those conditions apply for you. Since Direct Consolidation loans are meant to help graduates and students, you will not have any applications fees and you can prepay the loan without a penalty.
Interest Rates on Direct Consolidation Loans
Interest rates on Direct Consolidation Loans are fixed for the loan term.When you consolidate loans, the fixed rate normally iscentered on the average of the interest rates on all of the loans once they are consolidated and then raised to the closest one eighth of one percent. The interest rate will never exceed eight and a quarter percent.
Consolidation Loans: How to Apply for Them
Direct Consolidation Loans can be applied for in several different ways.You can apply directly at the Direct Consolidation Loan website, online. They even have express applications that can be taken via phone. You can download an application to fill out, as well as the promissory note, at the Direct Consolidation Loan website too. They are more than happy to send you a package with all of the information when requested.
How Do I Begin Repayments?
When a Direct Consolidation Loan is disbursed, you have sixty days to begin making payments. You are allowed to make payments soon than sixty days if you wish. All of this information will come from your loan officer and they should let you know the exact date your very first payment is due. Normally, repayments range from ten to thirty years with the term being contingent on the sum of the loan, your repayment plan and any other educational loan debt.
There are plenty of repayment plans that you can choose. Each one meets the individual needs of the borrower. These plans will be explained in detail by your loan officer when you consolidate your loans when them.