Best Option For Students: Federal Consolidation Loans

There are many types of loans out there, and there is one that is just for students. These loans are federal consolidation loans.

Apart from the private financial institutions, there is another type of loan consolidation program that debtors with multiple loans can opt for, and this is offered by the U.S. federal government.

Federal loans for students are among the easiest loans to get. This makes sense when you stop to consider that students and recent graduates have little to no source of income and a range of debt from student loans to credit cards and medical bills. The United States Department of Education has put programs into place that can consolidate all federal education loans taken out by a student and these programs allow the student to pay for all the loans in one single monthly payment.

If you have a multiple student loans, you should know that you actually have the right to consolidate your loans under the Higher Education Act, which created the federal consolidation loans under the Direct Loan Program and the Federal Family Education Loan (FFEL) Programs.

Under these federal consolidation programs, however, only federal loans are eligible to be consolidated. To qualify for these loans, you must also already have at least one federal loan through the Direct Loan or FFEL programs. The loans must either be in their grace period, deferment status, or in default.

You can get more details about federal consolidation from Federal Student Aid, which is part of the United States Department of Education. In addition to FFEL loans, there is another type of loan, which is the CBSL loan. These two loan types encompass a wide variety of loans, such as Federal Parent PLUS Loans, Federal Direct Loans, Federal Direct Grad PLUS Loans, Subsidized Loans For Students(SLS), and Federal Stafford Loans both subsidized and unsubsidized, as well as Health Professions Student Loans, Federal Nursing Loans, Federally Insured Student Loans, and Federal Perkins Loans.

FFEL loans and CBSL loans cannot be co-mingled, and you need to consolidate the different types of loans under FFEL-type or CSBL-type of consolidation loans. In any case, federal consolidation loans can greatly reduce your monthly payments into one, and reduce the payment amount up to 40%. Term payments too can be extended up to 30 years.

There are private student loans and federal student loans. If you have a mix of both, it would be wise to prioritize the federal loans. This is because loans that were granted by the United States Department of Education can have lingering effects on your finances, even beyond your graduation. The federal government can require your employers to deduct 15% of your gross salary to pay for a defaulted loan or loans. Your tax refunds can also go to the payment of your debt.

Having multiple federal student loans at the same time need not be a source of stress. The federal government, in offering consolidation loans, has actually provided you with a solution to this situation. Keep in mind, however, that as with all debts these consolidation loans must be paid.

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